Bitcoin: Warning Signs On My Radar
As many other traders I am asking myself whether Bitcoin is ready to explore new uncharted price territories or if we are currently witnessing the second major top in Bitcoin prices.
First, I want to emphasize that at current I don't see much evidence on higher time frames that the market is ready to turn south anytime soon. However given the fact that we are trading at (or near) the all-time high I feel that some extra caution is warranted. So these are some warning signs on my radar that I am currently paying attention to:
(1) The long term rising trendline. Ever since the trend changed in August 2015, price respected the trendline charted in purple. I am expecting this trendline to hold for the foreseeable future. I would interpret a break of the trendline as a strong warning sign that the market is ready to turn its direction once more.
(2) Looking at the CNY markets I see a pattern that could turn into a head and shoulders. You can also see the pattern in the USD markets if you squint hard enough, but it seems much clearer to me looking at BTCCNY charts. (The head even seems to be made of a smaller H&S.) I want to see this pattern to dissolve into a more complex correction, especially given the fact that it has the potential to break the trendline should it play out.
(3) Zooming in into (4-)hourly timeframe on Bitstamp, I see price action that I could easily label as as an impulsive five-wave move to the downside. This is followed by a move up that I would classify as corrective. (Note the fading momentum/bearish divergence on the ROC indicator.) While I don't regularly use Elliott waves in my trading, I tend to pay attention when I see a clear wave pattern such as this one. Here again, I don't want to see another impulse wave to unfold and the trendline to be broken.
Trade with care,
NtW
First, I want to emphasize that at current I don't see much evidence on higher time frames that the market is ready to turn south anytime soon. However given the fact that we are trading at (or near) the all-time high I feel that some extra caution is warranted. So these are some warning signs on my radar that I am currently paying attention to:
(1) The long term rising trendline. Ever since the trend changed in August 2015, price respected the trendline charted in purple. I am expecting this trendline to hold for the foreseeable future. I would interpret a break of the trendline as a strong warning sign that the market is ready to turn its direction once more.
(2) Looking at the CNY markets I see a pattern that could turn into a head and shoulders. You can also see the pattern in the USD markets if you squint hard enough, but it seems much clearer to me looking at BTCCNY charts. (The head even seems to be made of a smaller H&S.) I want to see this pattern to dissolve into a more complex correction, especially given the fact that it has the potential to break the trendline should it play out.
(3) Zooming in into (4-)hourly timeframe on Bitstamp, I see price action that I could easily label as as an impulsive five-wave move to the downside. This is followed by a move up that I would classify as corrective. (Note the fading momentum/bearish divergence on the ROC indicator.) While I don't regularly use Elliott waves in my trading, I tend to pay attention when I see a clear wave pattern such as this one. Here again, I don't want to see another impulse wave to unfold and the trendline to be broken.
Trade with care,
NtW
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