In our previous update, see here, and as shown in Figure 1 below, we found for by using the Elliott Wave Principle (EW) that,
“… BTC bottomed exactly at the 61.8% retracement of the June-July gray Wave-i rally: $107,271 versus $107,647. This pattern is typical for a second wave, specifically the gray W-ii. Furthermore, the entire correction from the July top can be viewed as an irregular expanded flat: orange W-a, -b, -c = 3-3-5. The decline from the August ATH (irregular W-b) clearly consisted of five waves. … Lastly, positive divergence was building on the technical indicators, while the MACD had reached levels not seen since March-April, which was a significant low. Besides, today marks the 3rd consecutive up day, which has not been seen since July 11. Thus, it appears a trend change is underway.”
Fast forward, and BTC had indeed bottomed out, rallying to $117,981 on September 18, proving our EW-based analyses correct. After, it started another decline. Therefore, we label the recent rally as orange W-1 and the current decline as orange W-2, contingent on the cryptocurrency holding above its warning levels for the Bulls*
Figure 1. Bitcoin’s short-term Elliott Wave count with several technical indicators and moving averages.
Like the gray W-ii, second waves tend to retrace between 50-76% of the prior 1st wave rally, which in this case targets $112,564-$109,807. Bitcoin has now reached that zone.
Thus, the orange W-2 has become protracted (yesterday’s bounce, today’s 2nd leg lower), but a break above the orange W-1 high ($117,981) will be a serious warning for the bears, with confirmation of gray W-iii above the gray W-i high ($123,220). We will then look for 159-161K before we see a more significant (green W-4) pullback.
*Warning levels for the Bulls: first, blue, at $112,043 (25% chance no W-1, 2 setup); second, grey, at $111,118 (50% chance); third, orange, at $109,345 (75% chance); and fourth, red, at $107,271 (100% chance no W-1, 2).