It seems that everyone is still worried about BTC these days, and reasonably so. However, I believe that a confluence of indicators suggest that we are very close to the end of this long hard bear market. By my count, this correction conforms fairly well to a WXYXZ style correction (though there are valid alternate counts). Currently, I believe that we are completing the last wave downward on our final zigzag leg (labeled X-Z). Remember that zigzags always have a 5-3-5 rule. Each of these is labeled on the chart.
The end of the Bear: A Confluence of Indicators.
Last week, (during wave 3), we experienced a very hard bounce off the long term historical support level of 7.8k$. I think that this range may be tested again on this final leg down. By my count, I would expect that prices may continue to decline to touch these levels before moving back up again. However, I do not think that 7.8k$ will be breached due to this being a historical support level. This notion is supported by the strong surge in volume when the price attempted to breech this support.
MACD Shows Bullish Divergence
Note the MACD shows two crossover points which correspond to the (Y) point as well as the (3) wave of this current (X-Z) on the larger degree of trend. What stands out to me is that these crossover points on the MACD show a higher low. This property, known as bullish divergence, indicates that the sellers are running out of steam and that demand will potentially pick back up.
RSI Shows Support Levels
Now for the RSI. With moving up of wave (4) on our current zigzag B-C leg, we saw a swing into the neutral zone of 30-60. The RSI shows also a series of higher lows suggesting again that the bears are running out of steam. I see two RSI support zones, first at 35, and again at 30. As we make our attempt to push downward to test 7.8k$, I expect that this support will be tested and held (in confluence with the MACD).
The bears are getting tired ...
I also want to make a note of the fact that the ratio BTCUSDLONG/BTCUSDSHORT has snapped back from its low, and the corresponding RSI has moved back into the neutral zone. Currently, for every 1.0 BTC in a short position, there are 2.267BTC in a long position. Compare this to the deepest part of this last leg down, where the the ratio was about 1.0BTCLONG/1.0BTCSHORT. In other words there are much fewer people shorting the market - leading me to believe that BTC will soon begin to rise once again.
To break below the historical 7.8k$ support would require another huge surge in sell volume (panic selling). Additionally, the MACD bullish divergence would have to break along with both RSI support levels. My intuition is that the price may test this level, and bounce back perhaps forming a leading first wave diagonal to initiate a new bull cycle. Of course, anything is possible, but to me this seems like the most likely scenario given the current data. Undeniably, this market has been a difficult learning experience for us all, and I hope that everyone has developed a healthy respect for such powerful market tides.
Take care during the end of this correction!
Confidence 4.0/5.0
Standard Legal Note
These are solely my own ideas! This is by no means professional financial advice and I cannot be held accountable for any investment decisions undertaken by reading this article!
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