Bitcoin prices took a dramatic drop yesterday, despite having given indications that price wanted to go higher. Prices have rallied back to almost the high, but there are now indications that bulls should be wary.
Elliott Wave theory suggests that corrective waves often take a 5-3-5 pattern. In this case, it is often the case that the 1st and 3rd waves are related to one another in a Fibonacci relationship. In other words, the third wave might be .618 of the first wave, or often, the waves might be the same size in terms of price.
That is exactly what we saw yesterday. The collapse occurred just as the second wave reached the same price range as the first. See the picture below:
As we know, one should “never say never” in the trading business. There are big players who make their living trying to run stops, and otherwise try to manipulate the charts to their benefit. However, I have long suspected this rally from the swing low was a wave B of an A-B-C corrective wave. The fact that price dropped so strongly when the waves reached the same size makes me suspect that wave B might have just ended. If so, then wave C is beginning, which will likely test the 750 low.
In the event that price rallies above the recent swing high of 1069 (Kraken) then my stated concerns will be shown to be likely in error. We will see….
Happy trading!
Remember: The author is a trader who is subject to all manner of error in judgement. Do your own research, and be prepared to take full responsibility for your own trades.
Image from Shutterstock.
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