In my last weekly update on January 16 I almost precisely forecast the level of the initial drop of BTC price. The corrective wave stopped at 28991 which is less than 200 points below the level of the supposed wave 4 of lower degree – 29178. Such accuracy supported the hypothesis that the top on January 8 was the top of a major wave III and we are currently dealing with wave IV which could take various combinations of shapes. Let’s explore the possible waves based on the freshly printed weekly and daily candles.
The last two weekly candles were almost identical red candles (body lengths of 4116 and 3962 respectively). The second candle closed just a tad below the body of the last green candle and just a bit above the previous week low. I view that the odds at this point are almost 50/50, very slightly bearish. The worst case for the bulls would be another similar red candle next week, so that the Three Black Crows are complete.
Note that the weekly PSAR flipped to the dark side several days ago and if you look at the Bollinger Bands, the range of the fall could be as deep as to 2000 (two thousand), though I think it would be extreme at this point.
If we look at the Long Term chart, we could see how the first wave of correction was stopped at the support level. I have not changed graphics on the LT chart and I am expecting that the whole corrective wave would take much longer time to fully develop, possibly months. Currently the green is my main operative count, however, if the next week prints the Three Black Crows, the red count would definitely climb up the probability ladder.
The daily Mid Term chart is very interesting from multiple perspectives. First it shows a very clear Double Top pattern. As indicated on the chart, the next several days (or even weeks) there would be a battle over the neck. If we see a closure or two below the neck, there would be a high chance of a continued downfall. However, if the candles continue to close above the neck (and a rather weak weekly candle supports this), the price could start making a flat wave as indicated on the chart. The next week would be crucial to determine a path for the next several months.
I tried to make a forecast for the next week based on two possible paths that I discussed above. The green, the main operative: I am expecting a complex corrective wave that would be slowly climbing up. Though it is almost impossible to forecast the corrective structures, I think that the price could reach 36000-38000 and then bounce back by the end of the week.
In case of really bearish mood of the market, the price could stay within the red channel and try to complete a diagonal for the first wave down. In this case, if the next week (and month) closes below of this week low – 28991, I would treat this as an extremely bearish sign and a possible beginning of a multi-month correction (likely the red count).
No matter what path BTC is going to take, I am expecting the next week to be highly volatile and unpredictable. The monthly print should make the overall picture clearer.