In our previous article about the cryptocurrency, titled “Bitcoin ETF Rejected by the SEC? No Problem!”, we expressed a bullish opinion, shortly after the price of bitcoin touched a low of $944. The positive outlook was motivated by the Elliott Wave interpretation of the 4-hour chart below.
As visible, this chart made the classic 5-3 wave cycle visible, suggesting the virtual currency’s decline from $1350 is approaching to its end and a significant recovery should follow. In addition, the starting point of the five-wave impulse at $751 was supposed to stay out of danger. Almost a month later, the 4-hour price chart of bitcoin looks like this.
The bears managed to achieve a third breach of the 61.8% Fibonacci level, but still could not threaten the invalidation level at $751. Thus, the bullish scenario was still alive and all we had to do is stay calm and stick to it. So far, this strategy is paying off with bitcoin price hovering above the $1200 mark again.
Now, the speed and sharpness of the current rally from $891 to $1220 suggests the uptrend has resumed. On the other hand, bitcoin might have gone too far too fast. Does this mean it is time for a pullback? The hourly chart below might help us find the answer.
If this chart could speak, it would probably say “proceed with caution.” First of all, the advance from $891 could be seen as a complete impulsive sequence. According to the theory, it should be followed by a three-wave decline, before the bull trend continues. Second, the relative strength index shows a bearish divergence between the last two swing highs.
In conclusion:
- The Wave principle works for the price of bitcoin, as well
- Bitcoin’s uptrend has resumed
- On the other hand, we should prepare for a short-term dip
If this is the correct count, we can move the invalidation level from $751 up to $891. However, buying right away does not seem to be the best decision, since a 100-dollar correction could be expected.
