Expect a Big Rally in Bitcoin Soon
Three weeks ago, see here, I shared with you a straightforward way to identify price trends in Bitcoin (BTC) that “help us determine to be aggressive, conservative, or downright Bearish and make trading less complicated.” I found “BTC entered an initial downtrend for the Bulls in mid-November … and the trend [now] tells us to look lower, not higher. In early December, I was already looking for preferably $28-36K. See here. With BTC currently trading at around $46K it has room to drop some more, which is what the “trend is your friend” chart tells us.”
Fast forward, and BTC dropped to as low as $39667 yesterday, January 10. Another ~13% decline since I shared my trend chart. Thus, both my Elliott Wave Principle work and trend following tools have been reliable in forecasting BTC’s trend: lower. However, nothing goes up or down forever. Hence the EWP starts to point towards a more meaningful low. Allow me to explain below.
Figure 1. Bitcoin weekly chart with detailed EWP count and technical indicators.
Every correction is always made up of at least three waves: a, b, and c.
The weekly chart in Figure 1 shows BTC is below its 10-week and 20-week Simple Moving Averages (SMAs), but still above its Ichimoku Cloud (the Cloud), while the technical indicators (RSI5, upper panel; and FSTO, lower panel) are getting oversold. Thus, all ingredients are available to set up a multi-week counter-trend rally. However, at this stage, it is unknown if the current decline from the all-time high (ATH) made last year will consist of three or five waves.
If the former, then we should see the more extensive (black) major-b wave develop soon, whereas if the latter, all we should expect is a short-term bounce first to about $47K+/-2K before the last drop to around $32+/-2K. From there, the b-wave can then start. I keep my premium crypto trading members daily abreast of each option in great detail to ensure they are as well-prepared as possible for either option.
Regardless, once the more significant (black) major wave-a completes, see figure-1, we must expect at a minimum three waves back up: the large wave-b because every correction always comprises three waves: a, b, and c. I expect this b-wave to challenge the resistance zone at $57.5K to $60K. From there, major wave-c of (blue) primary wave-IV should take hold and drop BTC’s price back into the ideal target zone of $28-36K, with the lower end preferred.
Bottom line: Bitcoin’s trend was already and correctly identified as “not friendly” weeks ago, and its price has lost another 13% since. BTC is now getting close to the upper end of my ideal $28-36K target zone, and the weekly chart setup has all the ingredients in place to allow for a multi-week counter-trend rally to ideally $57-60K before the subsequent c-wave decline starts.
However, the devil is in the detail. I am keeping my premium crypto trading members abreast if we may only see a shorter-term bounce to about $47K+/-2K before a final drop to around $32+/-2K from where this more significant b-wave can then start. Meanwhile, many of my crypto trading systems’ members are exiting their short-term short-positons, which also signals a trend change (from down to up) is likely imminent.