As we move further into 2020 its becoming more clear that the bulls are back in town. The cryptocurrency market is rising again and Bitcoin could be on its way to achieving new highs after a brutal bear market in 2018.
With Bitcoin trading above $10,000 once again, its helpful to get a birds eye view of the overall market to determine where things could end up going. Looking at higher time frame charts set the context for levels where violent moves can be expected.
Chart analysis at this level prevents timeframe “blindness” when trading in lower or “normal” timeframes such as 6H or lower. For this analysis I will be using the 4 day chart, which gives us slightly less noise than the Daily chart by a factor of 4. This can help filterout additional daily noise and weekend activity.
Red = 2017 Bear market retrace extensions. Measured from 19000 to 2985, levels are extended past the 100% retracement level to find areas of potential resistance
Pink = 2017 ATH extensions. The range of $200-$19000 spaning from 2015-2017 and subsequent retrace to $2985 (derived from the 2017 bear market in red) is projected out to measure potential profit targets
Green = 2019-2020 Overall market activity. Extensions are measured from bear market retrace at $3000 up to 122800 and back down to 6860. These are potential profit targets if price breaks above the previous swing high.
Levels with at least 2 areas of confluence
$12200 – $14633 – Triple 0.618 confluence. It can be expected that this level will serve as heavy resistance and could take an extended time to break out of.
$21000 – $21800 – 1.618 Extension of 2019-2020 market activity. If new highs are painted, it can be assumed that the breakout is a Elliot Wave 3, typical target of such a move the is 1.618 extension, which is confluent with a 1.0 extension of the 2017 bull market.
$24400 – $25000 – These levels are less strong than the previous, but noted because confluence does exist. This level could be expected as resistance for a short pullback.
$28900 – $29900 – A double .618 confluent zone between the 2018 bear market extension and the assumption that 2019-2020 activity up to this point is a Elliot Wave 3.
$33000 – $35000 – Triple confluent zone between all three measurements. It could take significant time to reach these levels.
One important thing to note is the overall percentage gain from this point to $30K levels is roughly 231% or 2.3X investment. While this is a very respectable gain, it could take many years to reach these levels.
To illustrate this point, a buyer at $3K stands to gain an increase of 10X opposed to a buyer at $10K who stands to gain only 3X. Keep your entry in mind to maintain perspective and realistic expectations.
Most significant Fibonacci numbers in trading are 0.382, 0.618, 0.786 and multiples (ie 1.618, 2.618). Other significant levels include 1.0, 2.0, 3.0.
Areas with two or more extension levels are considered to be confluent. A short course in Fibonacci Measurements and Elliot Wave Theory is recommended for those unfamiliar with these subjects.