Primary Chart: AVAX's rally from August 29, 2022, to September 12, 2022 Appears Corrective
It appears that the downtrend in AVAX's price has resumed. But one need not speculate based solely on the recent days of selling. Price charts for AVAX have left plenty of evidence to show where price may go next.
First, it's important to define the overall trend. The most basic way to do so is by looking at the major highs and lows on a higher time frame, like a daily or weekly chart. Then, evaluate whether the price has formed higher highs and higher lows or lower highs and lower lows. Below is a daily chart, where anyone can see that a series of lower highs and lower lows has appeared since November 2021.
Supplementary Chart A: Defining AVAX's Trend
Furthermore, the downtrend channel—with its trendline across the major swing highs since November 2021—leaves little doubt that price has remained in a downtrend. The return line (the lower line of this parallel channel) also helps visualize the downtrend.
The 21-day EMA is also a helpful trend gauge. For the majority of the distance that the 21-day EMA has printed on this chart, the slope has been negative and this EMA has made downward progress. Yes, a few upward segments appear, but they are a smaller proportion of the overall line.
Next, an anchored VWAP can help see where price is relative to where it has been over the summer. The VWAP in the chart below is anchored to the lows of June 2022. Note how price action has been very choppy over the summer, much like the price action in major equity indices like the S&P 500
SPX
and the Nasdaq 100
NDX
. Price broke above this anchored VWAP at least four times, and some of the rallies were sharp and powerful as bear rallies can be.
Supplementary Chart B: Anchored VWAP with Several Failed Breakouts
The fact that price has broken above the anchored VWAP at least four times and failed back below it each time supports the notion that this summer's upward price move was a countertrend bear rally. The last breakout attempt over the anchored VWAP in early September was by far the weakest, suggesting that buying pressure is waning and that the downward trend is likely to begin again in earnest in the short-term.
One need not have an infallible Elliott Wave (EW) count to analyze the price action and draw useful inferences with EW concepts. The chart below defines the two essential types of waves under Elliott Wave theory. These basic definitions may be applied to the downtrend since November 2021. The result supports the same conclusion reached using other methods of technical analysis discussed above—that price is trending down with upward rallies being countertrend and corrective in nature.
Supplementary Chart C.1: Elliott Wave Analysis for Entire Downtrend
Even the price action since the June 2022 low can be examined under EW principles for helpful inferences as to whether the downtrend has resumed. Since even the best EW analysts can disagree about precise counts, a more useful approach to EW can be to evaluate motive and corrective price action by its basic characteristics, as shown in the chart immediately below.
Supplementary Chart C.2: Elliott Wave Analysis for June-September 2022 Price Action
And AVAX's price action for the rally of the past several weeks can also be analyzed using EW concepts. The Primary Chart above shows how the two legs of the rally are nearly equal. They have a common proportion of 1.272, a Fibonacci relationship common in corrective patterns known as zigzags, and also a common corrective pattern known as a complex W-X-Y correction. (For the non-EW readers, it helps to know that an EW corrective pattern constitute an upward price move in a downtrend as well as a downward price move in an uptrend.) Because the legs of the rally fall into a 3-wave pattern in which wave A = 1.272 x wave C, a Fibonacci relationship that is near equality, one can conclude that the entire summer rally was a corrective and countertrend move. From this premise, one also may infer that the trend, when it resumes, will continue downward.
Lastly, AVAX has lost all its major retracement levels from this summer's rally. Importantly, it has lost its .618 and .786 retracements. If one were to question whether the summer rally was the start of a new uptrend, one would want to see the .618 and .786 retracements hold as support before price turned higher again. These retracements typically hold as support when price retraces only a portion of an uptrend move. But they have failed as support as shown below, which suggests the downtrend is likely resuming as of last weeks price decline.
Of course, the .786 retracement at $17.39 could easily be retested and even broken briefly similar to the way the .618 retracement was in previous days this month.
Supplementary Chart D: Fibonacci Analysis as to Summer 2022 Rally
It appears that the downtrend in AVAX's price has resumed. But one need not speculate based solely on the recent days of selling. Price charts for AVAX have left plenty of evidence to show where price may go next.
First, it's important to define the overall trend. The most basic way to do so is by looking at the major highs and lows on a higher time frame, like a daily or weekly chart. Then, evaluate whether the price has formed higher highs and higher lows or lower highs and lower lows. Below is a daily chart, where anyone can see that a series of lower highs and lower lows has appeared since November 2021.
Supplementary Chart A: Defining AVAX's Trend
Furthermore, the downtrend channel—with its trendline across the major swing highs since November 2021—leaves little doubt that price has remained in a downtrend. The return line (the lower line of this parallel channel) also helps visualize the downtrend.
The 21-day EMA is also a helpful trend gauge. For the majority of the distance that the 21-day EMA has printed on this chart, the slope has been negative and this EMA has made downward progress. Yes, a few upward segments appear, but they are a smaller proportion of the overall line.
Next, an anchored VWAP can help see where price is relative to where it has been over the summer. The VWAP in the chart below is anchored to the lows of June 2022. Note how price action has been very choppy over the summer, much like the price action in major equity indices like the S&P 500
SPX
and the Nasdaq 100
NDX
. Price broke above this anchored VWAP at least four times, and some of the rallies were sharp and powerful as bear rallies can be. Supplementary Chart B: Anchored VWAP with Several Failed Breakouts
The fact that price has broken above the anchored VWAP at least four times and failed back below it each time supports the notion that this summer's upward price move was a countertrend bear rally. The last breakout attempt over the anchored VWAP in early September was by far the weakest, suggesting that buying pressure is waning and that the downward trend is likely to begin again in earnest in the short-term.
One need not have an infallible Elliott Wave (EW) count to analyze the price action and draw useful inferences with EW concepts. The chart below defines the two essential types of waves under Elliott Wave theory. These basic definitions may be applied to the downtrend since November 2021. The result supports the same conclusion reached using other methods of technical analysis discussed above—that price is trending down with upward rallies being countertrend and corrective in nature.
Supplementary Chart C.1: Elliott Wave Analysis for Entire Downtrend
Even the price action since the June 2022 low can be examined under EW principles for helpful inferences as to whether the downtrend has resumed. Since even the best EW analysts can disagree about precise counts, a more useful approach to EW can be to evaluate motive and corrective price action by its basic characteristics, as shown in the chart immediately below.
Supplementary Chart C.2: Elliott Wave Analysis for June-September 2022 Price Action
And AVAX's price action for the rally of the past several weeks can also be analyzed using EW concepts. The Primary Chart above shows how the two legs of the rally are nearly equal. They have a common proportion of 1.272, a Fibonacci relationship common in corrective patterns known as zigzags, and also a common corrective pattern known as a complex W-X-Y correction. (For the non-EW readers, it helps to know that an EW corrective pattern constitute an upward price move in a downtrend as well as a downward price move in an uptrend.) Because the legs of the rally fall into a 3-wave pattern in which wave A = 1.272 x wave C, a Fibonacci relationship that is near equality, one can conclude that the entire summer rally was a corrective and countertrend move. From this premise, one also may infer that the trend, when it resumes, will continue downward.
Lastly, AVAX has lost all its major retracement levels from this summer's rally. Importantly, it has lost its .618 and .786 retracements. If one were to question whether the summer rally was the start of a new uptrend, one would want to see the .618 and .786 retracements hold as support before price turned higher again. These retracements typically hold as support when price retraces only a portion of an uptrend move. But they have failed as support as shown below, which suggests the downtrend is likely resuming as of last weeks price decline.
Of course, the .786 retracement at $17.39 could easily be retested and even broken briefly similar to the way the .618 retracement was in previous days this month.
Supplementary Chart D: Fibonacci Analysis as to Summer 2022 Rally
Order cancelled:
Though a marginal new low was reached after this post was published, it was only slightly below (a few cents below) the prior low. So price has largely trade sideways and rangebound for the past two months since mid-September. ST will apply a "time based" stop and cancel this trade. (ST has recently seen open-ended forecasts from some social media counts. There is nothing wrong with that. But when forecasts are made in an open-ended way without a "time invalidation point," they become sort of like a broken clock predicting time, and it can be right simply through the passage of sufficient time—a broken clock is right twice a day. That is not a valid way to analyze and forecast in ST's view. Even though AVAX may tumble along with other cryptos in the coming weeks or months, this forecast didn't nail it in terms of time.
Comment:
Since this post was published in mid-September 2022, price declined –30%. Yes, a "time-based" cancellation of the forecast was applied on November 16, 2022, and that was appropriate because price had chopped sideways too long after the forecast was given. But within a few weeks (1.5 months from when this was cancelled on Nov. 16, 2022), the downtrend resumed decisively and price declined -30% from the $16.74 level it was trading when this was published.
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