Thursday, 29 March 2018

Bitcoin: Price Targets for The Final Leg of Correction

I stated in my last 2 Bitcoin posts Bitcoin: Critical Decision Time Coming Soon that i expect this rising trend line ABCD will likely fail to support prices.

Bitcoin chart showing trend line and supports
Prices as of 29 March 2018
(Click chart to enlarge)

And this break down has begun. The question now is how low will it get? To answer this question, let's look at the following weekly chart.

This long term chart is quite revealing.

First of all, after basing for nearly 3.4 years (sorry should read 3.4 years, not 4 years), the basing or accumulation phase ended in April 2017, and then the price broke out and did a parabolic run until the ATH in Dec 2017.

Weekly Bitcoin chart showing trend line and price targets
Note: Should read 3.4 years, not 4 years
(Click chart to enlarge)

During that dizzying parabolic run of 2017, every time prices correct, they pulled back to the rising trend that marked by "A" to "D" in the 2 charts above.

So you can say that the Bitcoin market has been in a bull market since the breakout in April 2017. And every time it corrected, it bounced off this rising trend line ABCD.

Just 3 days ago, the prices broke down below this rising trend line. The 3 logical targets are shown as T1 to T3. This marks the final leg of this correction / crash / pullback. In technical analysis, it's not unusual that a hard run after breakout would be followed by a pullback towards the breakout level (doesn't have to go back all the way to the breakout).

T1 = $5,850 - $6,000.  This is the YTD bottom or previous low where it staged an almost 100% dead-cat bounce. Relief rally is typically quite strong. I entered a long trade during this bounce and exited the trade after prices put in a double top (detailed in this post Bitcoin: More Pullback to Come After Failing Breakout). I'm certain that price will at least come down to this level. I give it a 95% chance that prices will come down to this level.

T2 = $3,100 - $3,500. Bitcoin had three 80+% corrections in the past. So if prices bottom at this level, it's about 85% from ATH. So Bitcoin can chalk up yet another 80+% correction into the record book. I give it a 65% chance that prices will come down to this level.

T3 = $1,850 - $1,900. This should be the final target, if Bitcoin gets this low at all. I don't think prices will get this low. But if it does, then all the gain since the breakout in April 2017 is almost completely unwound. It's actually about 90% unwound. I give it a 5% chance that prices will come down to this level.

I've said a few times before. With a market where prices is as volatile as Bitcoin, HODLing isn't a good strategy.

If you didn't sell near ATH of $20,000, after a drop to T2 or 84%, in order to break even, Bitcoin price would have to rise 530% ! Imagine you buy it at T2 and you see your money goes up 530%. For those who didn't sell at $20,000, they can breath a sigh of relief that their investment just break even.

P.S. I've made no mention of a death-cross. Not once!

No comments:

Post a Comment