When my last article hit on Seeking Alpha in late June, I was expecting a C wave in Bitcoin into the lower $7K region. Certainly a rally to that zone took place, but I didn't expect it to take this long. I definitely didn't expect to come back to civilization with price still in that area.
While the slow means by which this market is working its way lower is frustrating, its ability to fail at both upward and downward follow through is more so.
If you recall, in previous articles, I was looking for downward follow through into the high $4000's, and I noted that $7045 was needed to open up a trend change, at least in the short term. Well, so far we've seen downside limited to $5780 and have a move slightly over $7045. What does this mean?
$7045, as the 50% retrace (in log) of the third wave of C, was critical to consider the downside structure impulsive. With price currently at $7454, I consider the impulsive count invalid.
This doesn't mean we don't see further downside, but it also opens up the possibility that we have a trend change. We just don't know enough.
I have personally closed all my short trades, which are hedges on my larger portfolio, until I know more. I see two likely resolutions.
The first is continued downside as a diagonal. The structure for this path is a high wave 4 rally that considers the overall structure from the February a slow meandering C wave. We have seen the bottom of either A of iii or all of iii for that structure. $4700 remains the ideal target from the weekly chart, but it need not get that low to complete.
I have overlaid this downward perspective on my chart below in red. This view is valid all the way to $9885. However, ideally it sees no higher than $8085. I will question it above this level. This count should also be contained by the channel as I've drawn, though piercing it slightly in red wave 4 is not out of the question.
The second possibility I see is a large C wave rally to anywhere between $12,000 abd $15,000 before we see renewed downside to the $3000 - $4700 region. I have this labeled on my chart in white. This view must hold over $6700, and we ideally see five waves up to $9200 from our recent lows to confirm its likelihood.
Note that if we confirm this view, I'll also watch for five waves to complete over $15,000. If I see that, then odds are we've seen all of our correction that started in January. But for now, that is not my expectation.
I am somewhat partial to the white count. This fits quite well with current sentiment, which I would describe as apathetic. I also see much of this rally as driven by short covering. Short interest on Bitfinex, a chart I've shared in the past, continues to drop.
In short, we are now in no man's land. I have a slight leaning to a short-term rally, but we have by no means confirmed that we can't see downside. As far as personal trading, I mentioned above that I took off my short hedges and I'll keep them off until I see a clear downside setup. Further, I tend to sit on my hands in such moments. If we breakout above $9200, I'll begin to put on heavy leverage to swing trade a larger rally. But I'd prefer to go put that leverage on in the lower $5000's to high $4000's if I get the chance.