Bitcoin: Should You Buy The Next Pullback?
Dr. Arnout ter Schure | Dec 04, 2020 02:40PM ET
Bitcoin's rally certainly surprised me. In my last article from a month ago, I was looking for a top around $16,150+/-150. However, BTC reached as high as $19912 this recent Tuesday, Dec. 1. Upside surprises and downside disappointments are the hallmarks of a bull market. So that is a good thing (if one is long). As such, I was forced to adapt my Elliott Wave Principle (EWP) count: see Figure 1 below.
Figure 1. Daily Bitcoin candlestick chart, with detailed EWP count
The recent dip to $16,270 counts, in my humble opinion, best as a (grey) minute wave-a of a (green) minor wave-4. The subsequent rally was wave-b, and now -ideally- (grey) wave-c is under way back to $15,675-16,500 target zone to complete an (irregular) flat 4th wave. Please see for a description of a flat correction. If BTC does not breakout, and close above $19,680, that is my preferred path forward. A break and close below $18,175 from current price levels will add further weight to the evidence for the flat 4th wave scenario. Once this correction, which is then technically and only digestion of the recent gains, is over, BTC should rally to $21,700-23,700 to complete the green wave-5 of (red) intermediate wave-iii/c, etc.: the grey arrows highlight this path.
The alternate scenario is a direct rally to the $21,700-23,700 target zone, blue arrow, but that requires, as said, a close above $19680. Given all the negative divergences on the technical indicators (red dotted arrows), e.g., the MACD has not given a buy signal for the recent rally, I find the upside scenario less likely.
Overall, the next “dip” in BTC to ideally $15,675-16,500 can be a great buying opportunity, with the appropriate stops in place, i.e., a close below $15,675 would be a severe warning upside may not come, with a 2nd red light at the $15140 level. For now, there is some uncertainty about the short-term direction (days), but with the breakdown and breakout levels mentioned, trading it should not be difficult. Longer-term, the rally in BTC has, in my opinion, still has a long way to go, if downside/support levels hold.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.