BTCUSD: Combination of HS and Elliott Wave
Mar 21 2021
Today we want to present you the chart of Bitcoin.
As you probably know, the famous cryptocurrency has been rallying lately as many large funds and even companies like Tesla bought massive quantities in the order of Billions of USD. Despite the relevant news, we like to stay focused on the technicals and look at Bitcoin through the lenses of the Elliott Wave Theory.
Our analyst noticed the move down from the February 21st high in three waves, and we know that “three waves a trend don’t make”, meaning that the move had to be corrective.
Eventually we started to see a nice and clear old-school pattern called Head and Shoulders pattern. In this particular event it could be called inverse head and shoulders since the trend was expected to resume higher and not lower.
Ideally price would look for a retest of what is call neckline of the H/S pattern before uptrend resumes, and gives even more confidence in a bullish outlook.
BTC March 10 chart:
The H/S came very handy in this scenario because it was bringing confluence to out initial bullish count, and also helped us to find an additional analytical method. In this scenario the left shoulder is represented by wave A, the head by wave C and the right shoulder by wave 2 as shown in the picture below:
We would usually expect a continuation to the upside once the neckline had been broken to consequentially complete the wave 3. It didn’t take much before this scenario became reality. Price recovered very nicely and even hit H&S projection target zone that was also highlighted by Grega in this free article
So does the Elliott Wave work? Sure it does, because it's all about psychology behind the market's direction. So when something doe not work is not because of EW theory, but because of analyst that didn't correctly define the crowd cycle. Sometimes this is tricky, but sometimes can be much easier process when market moves and patterns are clear, so it's very important for our analysis to know what are good and what are bad market conditions; these above on BTC was classic, almost text-book example with combination of Elliott Wave and H&S.
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Have a nice day.
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