Does Bitcoin Need a Day or Two for Correction?

November 10, 2016 17:36 UTC

I suppose it is pretty clear that it was a good idea to resist the urge to chase yesterday’s rally in Bitcoin. As we hypothesized yesterday, it was, in fact, a swing high we would have been buying.  I had been concerned yesterday with the fact that the 8×1 Gann angle stopped the rally (yellow highlights).   So, what do we do now?  Well, let’s first look at the bear setup on the 2-hour chart:

We can see that we have a close below the 1×1 Gann angle, which is a bearish indicator.  What concerns me is that if you see the blue arrow, during the panic low price broke both of the 4th arc pairs, briefly.  Now, that might have been just an “overthrow” from panic selling.  But in many cases, when arcs have been pierced like that they will be tested again.  So I am inclined to expect a re-test of the 4th arc pair.  If broken, the 5th arc would be the likely target.  We will see.

But before price can test the 4th arc, it must get through the 3rd arc pair, and the 3rd arc pair is often a trend stopper.  So I will watch that area with blue highlights very carefully to see if it shows signs of being broken or not.

Now, let’s look at a bull setup on the daily chart:

Note that the June high was stopped by the 1×1 angle (blue highlights).  Then note that price is now at the edge of the 3rd arc pair.  In fact it was that arc which stopped the rally at 750.This suggests that there is strong resistance overhead right there.  My short-term expectation is another few days of correction, but if we get a green candle that closes above the current arc, my opinion might quickly change.

In fact I expect we WILL get through this arc in short order, and that the next leg of the rally will continue.  I’m just not sure it will happen THIS week.

However that blue vertical line is indicting that we are at a time to expect something to happen (180 degrees past the start of the rally in mid-May).  So, stay sharp.

Happy trading!

Remember:  The author is a trader who is subject to all manner of error in judgement.  Do your own research, and be prepared to take full responsibility for your own trades.

Image from Shutterstock.

Posted in: News

Jim has an MBA from the University of Southern California. He has been trading commodities, forex and bitcoin since 1993. You may email him directly at: jimfred1276 at gmail dot com. Feel free to follow him on twitter.

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