Bitcoin – Resistance Broken – Where to Now?

UPDATE: 05/07 from the 05/04 post

One of the comments was why is the 9340 level important and what is its purpose?  9340 is the 0.238 retrace of the overall correction which we consider a minor resistance level (in the broad perspective) but a major one in the shorter term.   It also overlaps with the 0.5 retrace of the previous bullish swing.   

The 9340,  though important,  was not my original level of focus.   At that time my focus was on 9696 level or the original level we broke out of.  I was  looking to see if this resulted in a throwback.   It did and since it failed to break back through we can consider this a “fakeout”.    The next level to look at is the 9340 level where resistance now becomes support.  

There is a higher probability that this is an extended wave B in a broader leg (4) corrective cycle then a continuation move.    Since C waves often pullback to wave 4 of the current cycle it is very possible BTC pulls back to 7800 to 8400.    This is why I mentioned a breakdown of the 9696 level may result in a pullback to the lower 8k support zone.  A breakdown of 9340 at this point adds much to the probability we re-test the lower 8k range.

There was another count we were looking at that took us to 11k from here, but a break of 9500 negated this count   (shown in magenta for illustration).    Keep in mind the broader count carries more weight and the shorter  (fractal) counts which are based on short term noise.   Trying to put these counts on a chart,   let alone all the possible counts,  not only clutters things up,  but can distract from the rest of the data around us which is equally and or more important.

Bottom Line –  this is likely a corrective sequence  at this time.    In the broader term we look at Elliott Wave cycles to gain perspective of the overall market cycle.   It is important to understand Elliott Wave is far from a crystal ball especially in the short term.    In the short term 10 analysts will likely come up with 10 counts.     I could look at any short term EW TA count and find five other counts with both bullish and bearish scenarios.   These are not dependable.   This is why we look at price action and levels of importance in the shorter term inclusive of EW. 

At this point let the market correction play out and we will look at the support levels shown for signs of a reversal and position accordingly but it appears that patience has paid off

Overview:

Pessimism has turned to optimism and even the comments from a former regulator that Ethereum and Ripple are “non-compliant securities” could not put a damper on market sentiment as they continued to move higher.    Bitcoin was testing a major resistance level and recently pushed through with good momentum.   This clears the way for Bitcoin to head towards the ~11k target zone,  but we are likely to see a stop along the way.   Clearly market sentiment is moving this market higher and we want to be positioned for this but where?

Technical:

There is a short term resistance zone between 9970 and 10323 where Bitcoin is likely to see some type of pullback.    These levels coincide with the 200 Day SMA increasing the probability of a pullback.    The 200 day was tested two weeks ago and the result was a pullback to the 0.50 retrace of the final swing leg up to wave (3).     Since these pullbacks have been very shallow, in general,   it is likely we see only a shallow pullback here where we retest 9696.

This is simply where the 9696 resistance level becomes support and IF we get a bullish reversal we likely move towards our 11k target area completing wave 1 in the intermediate term cycle.   There are not only several overlapping extension and retrace levels around 11k, but the longer term trend line which becomes a broader term resistance level and a likely leads to a broader term retrace back to the 8300 to 9700 area.    This provides and opportunity for a much longer term positional trade and one I personally want to have cash in hand and ready to make.   A bullish reversal and continuation off the 9696 level may provide an opportunity for a swing trade in the shorter term.

Bitcoin could also simply move higher from here continuing its bullish momentum.    I am fine with watching my longer term portfolio continue to increase in value after the February beating.  

The Contrarian view.  – A break of the 9696 level may result in a subsequent pullback to the lower 8k area, or the current major support zone

Since the 200 DMA often acts as a major support or resistance level,  momentum could stall here and a pullback to the major support level is very possible.   The  area between 9340 and 10k has numerous overlapping resistance levels in both the short and mid term which could result in a sudden selloff and subsequent pullback.  9696 is almost a line in the sand here.  This would only provide an opportunity for a swing or positional trade as a dip into these levels will likely be short lived.   

Summary:

Longer term cost averaging pullbacks almost always outperforms the active trader.   Many of whom saw huge losses shorting Bitcoin at extreme lows.    Broader wave 3 impulse moves offer the best opportunity to be 100% invested,  not at the top of a wave 1.   As good as it appears right now there is always the potential to retest extreme lows.   Only a little over a month ago few if any thought we would be testing 10k so soon.

Trading and investing require patience,  and there is never anything worse then a great opportunity arising and your 100% invested not allowing you to take advantage of the market herd.    Exercising a little patience vs giving into impulsive emotions generally provide better results in the long term.    This is no different then looking at a few pitches before swinging the bat.

As these markets move so quickly,  posting day  trades is just not feasible at this time,  but like the litecoin article,  there are setups that are mentioned for those that are accustomed to higher risk trades.

Disclosure:  Long Bitcoin, Litecoin

Trading and or investing in these markets is highly speculative and you should be prepared,  willing and able to lose 100% of your investment.

8 Responses
    1. Marc Principato

      If price breaks below the 9300 support, then it is more likely to retest the 8K’s. It all depends on how price chooses to unfold. The predetermined levels provide points for us to consider as the market unfolds. If price fits our criteria at a predetermined level, then we have an action to consider. Otherwise, we do not.

  1. btc.watson

    I feel like you could have mentioned 9300 in your analysis more significantly. Why does 9340 have a line and what is it’s purpose? Whatever happened to the 9500ish support in your other analyses. With so many supports, I don’t know how we’re supposed to choose a position.

      1. btc.watson

        Thanks for the detailed update! Seeing that we’re forming a rising wedge at 9300 support, I’m assuming we’re going to continue down to reach the support zone at 8600-8800.

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