LTCUSD update: Every once in a while, it is helpful to evaluate a longer term view of the market you are active in. Elliott Wave is a powerful forecasting tool that provides a potential road map which is especially useful for a broader technical perspective. In this article I am going to talk about my current wave count for this market, and how to relate it to shorter term trade opportunities.
The Market Road Map
I refer to Elliott Wave as a “road map” because it offers a theoretical outcome that the market either chooses to follow, or it doesn’t. This road map helps to provide reasonable expectations, and also offers a point of reference to compare to if price action is out of sync. Understand that Elliott Wave is a framework that categorizes order flow into a limited number of chart patterns. These patterns are a representation of the underlying market sentiment that expresses itself over and over again in particular chart “shapes”. So it doesn’t matter why they form, it just matters what they tell us about what is most likely to happen next.
This means that there is nothing that guarantees the potential wave count will play out. Waves can be cancelled out when price action does not meet certain criteria. This subjective nature is what frustrates and turns off many less experienced traders who seek exactness in an area where there isn’t any. The best way to use Elliott Wave is this: if the price action meets the rules, use it. If it does not, then use something else until it does again.
Current Wave Count
Currently this market is attempting to build an intermediate degree Wave (3) within a primary degree Wave 3. This is all part of a possible cycle degree Wave III which at completion can lead price to new all time highs.
The problem is, often Wave 3 of 3’s are usually aggressive waves that trend relatively quickly. As you can observe, the slope of Wave (1) is not very steep. This lack of momentum for this degree is a concern since it suggests that we are still in the cycle degree Wave II, rather than a (3) of 3.
Since the current retrace is likely to be Wave (2) of 3, there is still a chance it follows the Wave (3) road map, but it has to pick up soon. If price breaks below the primary Wave 2 low of around the 105 area, then this is most likely a compound corrective structure and will have to be reevaluated.
So what does all this mean? This market is still worth accumulating, or letting long trades run until the 105 low is taken out. IF that happens, then the outlook goes from long term bullish to neutral which means no new long positions until bullishness returns. According to the road map, if the market chooses to adhere to it, then price should be pushing the 185 area over the next few weeks. A reasonable peak would be somewhere in the mid 200s. (We also accumulated BTC for similar reasons.)
Putting It All Together
Elliott Wave offers a potential road map. According to where price is now, it still has a chance to adhere to the current count which points to prices well into the mid 200s before the next significant correction. The not so exciting slope of the recent intermediate (1) does keep the possibility open that cycle Wave 2 continues which is a bearish scenario to be mindful of. As the market unfolds, we will continue to monitor how well price adheres to this road map and adjust our stops, targets and positions as trading opportunities materialize.
Questions and comments welcome.