Bitcoin Proves Traders Can Prepare without “Knowing”

Elliott Wave analysis of BTCUSD a week ago

The price of Bitcoin slightly breached the psychological level of $3500 yesterday and still has not been able to escape its gravity as of this writing. The current selloff brought back the memories of the time when BTCUSD fell to $3122 a month ago.

And while in the markets everyone is an expert in retrospect, the question really worth discussing is how could traders prepare in advance for this decline in the market’s increasingly uncertain environment?

We cannot speak for everyone, but our way of dealing with uncertainty involves Elliott Wave analysis. For instance, our subscribers received the following chart on Sunday, January 6th, when Bitcoin was still hovering around $3800.

Bitcoin Elliott Wave analysis predicting decline to $3500

The 30-minute chart of Bitcoin against the U.S. dollar revealed that even though its fourth wave was bigger in relation to the second, the rally from $3122 to $4237 could be seen as a five-wave impulse, labeled i-ii-iii-iv-v.

An Alternative Count in Mind

According to the theory, a three-wave correction in the other direction follows every impulse. Here, our primary count suggested the drop from $4237 to $3566 was a simple a-b-c zigzag, which completed the whole 5-3 wave cycle.

On the other hand, the alternative count, shown above, acknowledged the possibility that the recovery from $3566 might be only wave x) of a larger w)-x)-y) double zigzag, which was still in progress.

Under this scenario, Bitcoin was also looking bullish in the short-term, but the resistance near $4100 was going to be a tough nut to crack for the bulls. Caution was advised in that area. Less than three days later, BTCUSD had already reached it.

Bitcoin allows for two alternative Elliott Wave counts

Bitcoin climbed to $4112 on January 8th. The chart above was sent to our subscribers as a short-term update the very next day, January 9th.

There was clearly no point in pretending that we knew what was going to happen. Both the positive and the negative outlook were still possible, so our only option was to keep both in mind and find something to tell us when the odds have tilted in favor of one of them.

A Single Line Made the Difference for Bitcoin Traders

The green support line drawn through the last three swing lows seemed important. A bearish breakout there would invalidate the bullish outlook and in the same time confirm the bearish alternative. Our opinion was that “below this line … the price is likely to decline to $3500 or lower.” Then this happened:

Bitcoin falls below $3900 putting the bears on the wheel

The price of Bitcoin breached the rising line of support on January 10th and put the bears in the driving seat with targets around $3500. BTCUSD fell to $3503 the same day and to $3476 on January 13th.

“Uncertainty” is practically synonymous with “markets.” Ever since trade exists, there has never been anything certain for market participants. A hard lesson was to be learnt by those who at one time or another thought they were guaranteed to make money.

Fortunately, the way Bitcoin has been developing in the last week proves that traders can prepare even though they cannot know.

What will BTCUSD bring next week? That is the subject of discussion in our next Elliott Wave PRO analysis due out late Sunday!

New to Elliott Wave?

Elliott Wave principle offers a completely new understanding of what the nature of the markets is, what drives them and what can be derived from their movement. This course is for those of you, who have been looking for an honest Elliott Wave guide, describing the method’s advantages over other trading tools, but not hiding its weaknesses.

Check Video Course    or     Check our eBook


See our Video Course
or check our eBook

Last year over 60k readers trusted EWM Interactive to help them in their trading decisions.

I’m very happy i discovered your service. Thanks so much and keep up the good work!

- Xavier N.

Just loving your analysis. Thank you so much, really wished you add some more currencies to your list You have a client for life :)

- J. Kotzee

I love the way EWM does business: response times & overall friendly demeanor are fantastic... and the prices are very fair. The trade recommendations read like like they come from a seasoned trader that is used to winning. Couldn't ask for more.

- C. Montgomery

I love the way EWM does business: response times & overall friendly demeanor are fantastic... and the prices are very fair. The trade recommendations read like like they come from a seasoned trader that is used to winning. Couldn't ask for more.

- C. Montgomery

I’m very happy i discovered your service. Thanks so much and keep up the good work!

- C. Montgomery

Just loving your analysis. Thank you so much, really wished you add some more currencies to your list You have a client for life :)

- C. Montgomery