This week the market was mostly in a correction, consolidating sideways while gradually retracing from the bottom in what I observe to be a corrective wave. The last impulsive drop from $280 and $270 exhibited a similar pattern. A 3 wave motive move to the bottom, with intermittent corrections. Retracement up from $247 to $271 was a 50% retracement – typical of corrective waves. The current price range, is a correction of an impulsive wave from $271 to $235. A 50% retracement level lies at around $254. So far, prices are within reasonable range of a corrective description.
The leg up from $235 low has been a rally on declining volume. Support on this sideways consolidation is at $239, evident from strong rejection by candlestick extensions. On the upper side, resistance is at fibonacci 50% retracement level – $254.Furthermore, on the 6H chart, 30 day EMA line has resisted breakouts above it at multiple significant points (encircled). 10, 20, 30 and 50 day EMA are above current prices. A short term reversal will have to break past all 4 EMAs for a convincing change of trend. For example, a sustainable break above $268.
Typically, increase in volumes during rallies and declines during dumps implies a bullish sentiment. The reverse i.e. increasing volume on dumps and decreasing volumes on pumps connotes a bearish trend. This chart clearly shows declining volumes on uptrends and significantly more on downtrends. This to me, is symptomatic of a bear trend, set to continue.
Read on for my bitcoin price forecast this week.
Bitcoin fundamental news
The Wall Street Journal reported interest in Bitcoin from mainstream finance is picking up. Probably the most prolific in this space, was investments into bitcoin start ups by mainstream banks – NYSE funding round into Coinbase. Just last week, NASDAQ partnered with Noble markets to enhance its trading platforms for digital assets. Bitcoin’s public ledger is touted as a remedy for default risk and transparency in financial settlements.
“It’s an opportunity for Wall Street to streamline some operations that are pretty antiquated,” said Duncan Niederauer.
Speaking to Tracy mayers on Bitcoin Knowledge podcast,Ledger X CEO Paul Chou expects volatility to resume in the event of inflow from institutional capital. Ledger X is a federally regulated swap clearing house for bitcoin derivatives. In his opinion, there is capital on the sidelines awaiting the right infrastructure to get on board. Chou further emphasized his optimism for Bitcoin on Wall Street, citing its instant settlement feature with final delivery as unlike any other commodity.
Finally, Barclays CEO Antony Jenkins, had stern words for the banking sector at a conference, touting disruptive technology as a threat to banks’ competitiveness. Quoted on Bitcoin magazine, he said “banking sector has not yet felt the ‘full disruptive force’ of technology – but it will.” While not mentioning Bitcoin explicitly, his remarks at the Morgan Stanley European Financials Conference in London, addressed payments. Banks are concerned by the allure of faster, cheaper payment alternatives available to their customers. “A bank won’t get involved with bitcoin if there’s a perception it has links to money laundering or terrorism” said Mariano belinky of Innoventures.
Digital currency acceptance by banks and mainstream capital is likely to happen. It is more a question of when rather than if.
Bitcoin weekly price forecast
Judging from the lack of any major fundamental news i.e. significant enough to warrant a rally, I expect prices this week to decline sharply. Another impulsive move is likely to take us to lows of $215 and lower; similar to those from $280 and $271.
As per Elliot Wave analysis, a basic corrective wave contains 3 sub waves – a, b and c. Therefore, the impulsive move down from $280, down to $235, was all part of one impulsive wave i. Since impulsive waves are followed by a correction, A-B-C is a corrective wave. The price levels experienced in the past 3 days since $235, are seemingly part of a correction. and quite possibly B. Following this pattern, the short rally up to $251 was likely wave C, up from B bottom. If not, expect a rally up to test upper resistance at $ 255 and possibly pierce it up to $260. However, this will be short lived, as wave ii of a larger wave count. Wave iii should follow after, impulsively taking prices to lower $ 215 support levels.
A pattern akin to this Elliott wave count illustration below.
Alternatively, a slim chance of a bull reversal will have to break past $ 271 to invalidate this recent move up as a wave ii count. Overall, the bear market since January 2014 is still playing out and a definitive bottom is yet to be confirmed. Bar any abrupt bullish news, next week we should expect lower levels than today.