How To Know When And Why Bitcoin Is Confirmed Bullish Or Bearish
Bitcoin is at the crossroads as to whether it's bullish or bearish. In this short analysis we'll explain how and, more importantly WHEN, you we determine which of the two it is. By being able to identify the technical direction at the earliest safest point, we'll either be given the gracious opportunity of stepping away from the fast-approaching freight train, or - in the case of Bitcoin actually being back to bullish - we'll be able to hop onboard it before it catches on too much speed.
As continually stated here on Trading View over the last few weeks Bitcoin is, until proven otherwise, in the midst of an ABC zigzag correction. The steep bullishness we're seeing at the moment is likely just a bull trap B-wave. And the very steepness of the last couple of weeks' price development tells that story on its own.
A few weeks back we re-entered with the entirety of our Bitcoin position (or rather Marathon Digital Holdings for the leveraged effect) upon Bitcoin breaking above its half-year long diagonal RSI resistance. This had been rejected some 8-9 times depending on how you count. And as always within technical analysis, the more times a support or resistance is being tested, the more violent the eventual outbreak tends to be - at least from a statistical point of view - as legion of pent up pressure is released. And that's exactly what we've seen since in Bitcoin as it's gone up by 45% since its RSI breakout.
So how then do we know whether this is a mere B-wave bull trap or whether it's in fact that bullish reversal towards new all-time high that everyone seems to be eagerly waiting for?
Well, if this were to be the B-wave of that zigzag, we know that the B-wave on its own should consist of an ABC (see picture below).
In an ABC zigzag correction the C-wave of the B-wave (the one we're in right now) is typically shorter than the A-wave of the B-wave. Yet, the C-wave can still reach equal length of the A-wave, albeit it's not as common.
At the moment, Bitcoin is trading right at a technical confluence of resistance. So far the C-wave of that B-wave is shorter than that of the A-wave of the B-wave. If they were to be of equal length it'd bring Bitcoin to the 618 fib between $50 000-51 000 (the $13 000 length of the A-wave added onto the B-wave bottom of the B-wave).
Now, as we've concluded we're in the prospect C-wave of the B-wave. We also know it's statistically unlikely for that to equal or exceed that of the A-wave. This is where the magic starts to happen.
First of all, if this were to be the end of the zigzag B-wave it naturally follows that the next retracement below $50-51K should amount to the 1st wave of the 1st wave of the C-wave.
Such retracement would have to at least reach the 382 of the C-wave of the B-wave in order to "count".
If such retracement - which would be clearly visible on the daily chart - were to again be recovered price-wise, it would automatically disqualify the ABC of the B-wave as it would then have initiated a fifth wave.
If, upon the next retracement that reaches at least the 382 fib, the price were to recover and take out the previous top we will KNOW that this is not the B-wave of that big zigzag, but rather a bullish 5-wave impulse - the first wave impulse out of a bigger 5-wave impulse - for a solid preparation towards new all-time highs.
The same zigzag nullifying principle applies if the price were to continue past $51 000 as it'd be a statistical abnormality for a zigzag B-wave. This would rather tell us that we're in the 3rd wave of a 5-wave bullish impulse. And the additional reason for this is simple: the 3rd waves are usually the longest (and NEVER the shortest).
All in all, if Bitcoin were to correct by at least the 382 at or below $50-51K this will constitute the high risk danger zone. This is where I will release the entirety of my Bitcoin-related positions (as in Marathon Digital Holdings). Upon reaching that 382, IF Bitcoin were to proceed by taking out the previous local top it would be a safe spot to go long as this would confirm the 3rd wave bullish count and automatically disqualify the entirety of the zigzag. If the price proceeds lower, chances are increasingly in favor of the zigzag being at work, preparing the price for much lower levels - technically in the late teens or early twenties.
Equally so, if Bitcoin were to break above and close above $51 000 it would also conclude that the B-wave is invalid and that Bitcoin is trading in the 3rd wave within a 5-wave bullish impulse.
In essence, the things to look out for are the $50-51K zone and whether Bitcoin can stay below or break above it AND how Bitcoin were to evolve if it were to retrace by at least the 382 fib (of the C-wave of the B-wave). If it were to continue higher than the local top, it will automatically disqualify the zigzag and confirm that Bitcoin is back to bullish. And if the price does not recover, expect significant drops in price.
As continually stated here on Trading View over the last few weeks Bitcoin is, until proven otherwise, in the midst of an ABC zigzag correction. The steep bullishness we're seeing at the moment is likely just a bull trap B-wave. And the very steepness of the last couple of weeks' price development tells that story on its own.
A few weeks back we re-entered with the entirety of our Bitcoin position (or rather Marathon Digital Holdings for the leveraged effect) upon Bitcoin breaking above its half-year long diagonal RSI resistance. This had been rejected some 8-9 times depending on how you count. And as always within technical analysis, the more times a support or resistance is being tested, the more violent the eventual outbreak tends to be - at least from a statistical point of view - as legion of pent up pressure is released. And that's exactly what we've seen since in Bitcoin as it's gone up by 45% since its RSI breakout.
So how then do we know whether this is a mere B-wave bull trap or whether it's in fact that bullish reversal towards new all-time high that everyone seems to be eagerly waiting for?
Well, if this were to be the B-wave of that zigzag, we know that the B-wave on its own should consist of an ABC (see picture below).
In an ABC zigzag correction the C-wave of the B-wave (the one we're in right now) is typically shorter than the A-wave of the B-wave. Yet, the C-wave can still reach equal length of the A-wave, albeit it's not as common.
At the moment, Bitcoin is trading right at a technical confluence of resistance. So far the C-wave of that B-wave is shorter than that of the A-wave of the B-wave. If they were to be of equal length it'd bring Bitcoin to the 618 fib between $50 000-51 000 (the $13 000 length of the A-wave added onto the B-wave bottom of the B-wave).
Now, as we've concluded we're in the prospect C-wave of the B-wave. We also know it's statistically unlikely for that to equal or exceed that of the A-wave. This is where the magic starts to happen.
First of all, if this were to be the end of the zigzag B-wave it naturally follows that the next retracement below $50-51K should amount to the 1st wave of the 1st wave of the C-wave.
Such retracement would have to at least reach the 382 of the C-wave of the B-wave in order to "count".
If such retracement - which would be clearly visible on the daily chart - were to again be recovered price-wise, it would automatically disqualify the ABC of the B-wave as it would then have initiated a fifth wave.
If, upon the next retracement that reaches at least the 382 fib, the price were to recover and take out the previous top we will KNOW that this is not the B-wave of that big zigzag, but rather a bullish 5-wave impulse - the first wave impulse out of a bigger 5-wave impulse - for a solid preparation towards new all-time highs.
The same zigzag nullifying principle applies if the price were to continue past $51 000 as it'd be a statistical abnormality for a zigzag B-wave. This would rather tell us that we're in the 3rd wave of a 5-wave bullish impulse. And the additional reason for this is simple: the 3rd waves are usually the longest (and NEVER the shortest).
All in all, if Bitcoin were to correct by at least the 382 at or below $50-51K this will constitute the high risk danger zone. This is where I will release the entirety of my Bitcoin-related positions (as in Marathon Digital Holdings). Upon reaching that 382, IF Bitcoin were to proceed by taking out the previous local top it would be a safe spot to go long as this would confirm the 3rd wave bullish count and automatically disqualify the entirety of the zigzag. If the price proceeds lower, chances are increasingly in favor of the zigzag being at work, preparing the price for much lower levels - technically in the late teens or early twenties.
Equally so, if Bitcoin were to break above and close above $51 000 it would also conclude that the B-wave is invalid and that Bitcoin is trading in the 3rd wave within a 5-wave bullish impulse.
In essence, the things to look out for are the $50-51K zone and whether Bitcoin can stay below or break above it AND how Bitcoin were to evolve if it were to retrace by at least the 382 fib (of the C-wave of the B-wave). If it were to continue higher than the local top, it will automatically disqualify the zigzag and confirm that Bitcoin is back to bullish. And if the price does not recover, expect significant drops in price.