Bitcoin: A Comprehensive Mid-Term Analysis 1D (May 07)

2020년 5월 7일

X Force Global Analysis:


In this analysis, we explore Bitcoin's historic price movements within the descending parallel channel, the most probable wave counts, and the bullish and bearish evidence behind bitcoin's current trend.

Analysis

- Bitcoin has been trading within a descending parallel channel for the past year
- Depending on how we connect the support and resistance points for the channel, it could be argued that we have already broken out of the parallel channel
- The first thing we can spot is the the wave counts within the parallel channel during the correction from 14k down to 6k levels
- We have a Triple Three / Elliott Triple Combo Wave (WXYXZ) count, in a textbook pattern
- The W and Y waves are consisted of Double Threes / Elliott Double Combo Wave (WXY), each correcting down to around the 0.5 and 0.382 Fib levels
- The Z wave is consisted of a Zig Zag / Elliott Corrective Wave (ABC), moving down to the 0.236 Fibonacci support
- After the Triple Three count, we expected Elliott Impulse Waves (12345) to play out.
- Eventually, we saw a textbook impulse wave count from 6.6k to 10.4k
- According to the Elliott Wave Theory, we should have seen a small corrective pattern down to a significant support level, before continuing our impulsive trend
- However, as the Intermediate Impulse Wave pattern got negated, we had to interpret the counts as a Double Three (WXY)
- All W, X, and Y Waves have been consisted of five waves, and in this analysis, we look at the Y wave as having been completed on the channel resistance


Bullish Evidence

- First of all, it's important to note that the trend is bullish, as we have broken through numerous major resistance levels, closing above 9.2k
- We have also broken and closed above the 0.5 Fibonacci support, around 8.9k
- On an alternative perspective, we could count the minor impulse waves (marked in green) differently, by seeing the impulse move from 6.1k to 9.4k as wave 3 (refer to the previous analysis below)

- Within the descending channel, we have been trading in a smaller ascending channel, which we have managed to break out of, and close above
- Thus, any small corrections we may see could be interpreted merely as a pullback before a continued rally
- Another strong bullish evidence we refer to is the EMA (exponential moving average) Ribbon:

- In our previous analysis, we have mentioned the use of ema ( exponential moving average ) ribbons as a sign of trend confirmations
- For the past three golden and death crosses generated by the ema ribbon, we have seen a 30-50% move.
- A move up to 10k, completing the fifth impulse wave, would be a 36% move from the ema ribbon cross
- The Relative Strength Index (RSI) has historically demonstrated clear signs of the trend.
- During corrective trends, it created lower highs, while creating higher lows during impulsive trends
- We are currently seeing the RSI form higher lows and higher highs, as a signs of trend strength


Bearish Evidence

- The first thing we can see for our bearish evidence is that the RSI is trading within overbought territories
- Historically, trading in overbought territories usually led to big corrections
- We also see bullish histograms decrease on the Moving Average Convergence Divergence (MACD) as a sign of weakened momentum
- The Moving Averages are also about to form a death cross on the daily
- On the 4H chart, we have spotted a technical bearish divergence, with higher highs on the price, and lower highs on the RSI
- It's also important to note that we are currently facing heavy resistance on the descending channel's upper trend line
- A strong evidence suggesting that Bitcoin is overextended can be seen through the envelope indicator.

- Extensions above or below the envelopes have served as strong signs of Bitcoin being overbought or oversold
- On the daily, it can be seen that prices have overextended above the envelope resistance, at an unsustainable level
- Thus, while timing it would be close to impossible, a pullback into the envelope is highly probable based on the envelope indicator


Market Sentiment:

Long short ratios are at 66 to 34, with long positions having slightly decreased. Nonetheless, this demonstrates that the market sentiment is still dominantly bullish.


What We Believe

In our previous analyses, we have mentioned that a correction is due, regardless of the scenario that could play out, and we stand firm with our perspective. Despite the bullish trend, we are slowly witnessing weakened momentum around significant resistance levels. While a break and close above 10k levels could invalidate our scenario with the highest probability, we believe that while the trend is still technically bearish, there are signs of overexertions, and Bitcoin being significantly overbought. Again, we believe that the best course of action is to approach the market from a cautiously bearish perspective for the mid term.

Trade Safe.