ETHUSD update: With 760 being the all time high and no real weakness in sight, it is important to gain a sense of how far can these markets go on the short term in order to decide whether to invest now or not. In this report I will refer to Elliott Wave in order to evaluate the potential reward / risk over the short term (next few weeks/month).
People often ask, "Why do you not always use Elliott Wave in your analysis?". Just because it is not on a chart, does not mean I am not using it. As a price action trader, I am always aware of the wave counts and will only write about them when they are relevant and clear. Otherwise they will confuse people.
In this chart, I am observing the wave counts on a weekly time frame. Why weekly? Because it provides a much clearer perspective of how much further this market can go before the next correction.(Note to new investors: markets do eventually correct).
As far as the current count, it appears this market is in a Wave 5 of a larger Wave 3. According to the basic rules of an impulse wave, wave 3 can never be the shortest wave. Often, wave 3's are large, move fast and are very euphoric. We are seeing this across many of these coins at the moment. Often any news and events that are in line with this trend will drive the price faster, while counter trend or negative news will has less of an effect. The bias is clearly bullish.
Based on the 1.618 extension measured from the Wave 2 low (140), the next proportionate target is the 814 area which provides some insight as far as where this market may find some significant resistance and begin a potential Wave 4 correction (I know no one wants to hear about corrections). The popular view is "Hey 1K around the corner!", which is possible, but these 1.618 extensions combined with the fact that this market is in a 5th wave, highlights the riskiness of taking new long positions at these levels. (Unless you don't mind a couple of hundred points of pain).
IF the market finds resistance in this area and a Wave 4 unfolds, a relevant level to evaluate for support (and possible buying opportunities) the the 518 to mid 400s area. Why? 518 is the .382 of the bullish structure measured from the broader Wave 2 low. This is where buying for the longer term would offer more attractive reward/risk compared to where price is now.
In summary, Elliott Wave serves as a road map, and is NOT an exact forecasting tool. There is NO precision in these markets, especially right now. Buying and holding works great when markets don't correct and go up 30%+ per day which is not realistic and will be temporary. For those who are in from lower levels, and plan to hold as an investment, it never hurts to lock some profit in and hold on to some no matter what happens. There seems to be this blind greed where people consider not locking in profit at the "top" a loss. Selling tops and buying bottoms are lottery tickets and if you are coming out of this market with more money than you entered with, that is a win which will not be appreciated until reality sets in. When markets are extreme as these are right now, it always helps to get perspective from a very large time frame like a weekly. Applying waves counts in this context does not offer exact buy/sell signals but instead provides a framework and levels that illustrate where the reward/risk is more attractive for entering longer term positions. No matter how you slice it, these markets are risky. The greater the risk the greater potential reward, you just have to be aware of the broader probabilities. Buying highs works at the moment, but in the long run is an ineffective behavior. The bad habits that are being created in this environment will be opportunities for the skilled traders when the correction comes. This cycle repeats itself over and over and has since the beginning of financial markets, and is the reason why TA has merit for those who know how to use it properly.
Thanks @MarcPMarkets , your analysis makes a lot of sense.
Amit26
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@Amit26, But I still feel the momentum and euphoria will push it to 1K easily. It has happened with BTC, a correction was long due but it kept going up and up.
The driving force is all the new money being poured into these markets by new comers. New comers are joining by hundreds of thousands and they are bringing in new money.
Hunor
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@Amit26, CME futures starts on 18 Dec. I think they (CBOE + CME) will start the bloodbath. My guess was / is that CBOE is waiting for CME to start trading and next week and they will short the market.
Bitcoin has a bright future, I believe in it. But at this moment I feel that something is looming in the dark. These price levels are insane.
Amit26
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@Hunor, Its true that these price levels are insane, and its also true that a correction will come eventually, but not NOW, not anytime soon.
To get a perspective, consider some recent news headlines:
1. Coinbase has more users than stock brokerage Schwab (CNBC, 27 Nov 2017)
2. Coinbase added 100,000 customers in one day after futures announcement (CNBC, 3 Nov 2017)
Just look around in your friend/colleague circles and you will get a feel of the excitement that this market has created. Hundreds of millions of $ are being poured in every day.
To us (who have joined the market sometime ago) it looks like we are at the peak, but to the millions of new comers who are joining now, the market looks like its just starting.
So, I think the market will go even higher, I am expecting much higher ATHs in the near future. The party has just begun.
Hunor
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@Amit26, Thank you.
Yes, many people expect this market to go even higher. My logic was that smart money (CME guys) would want to short it. However, they can even let it go higher before shorting.
OR: No massive shorting at all, just riding the waves.
I would have been glad to see "steady" rise, like until this November, not this huge pull since then.
raghavgrover013
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@Hunor, i dont expect a blood bath. Futures can be good for this market over all. Just wait for an ETH ETF announcement soon ( if that happens ETH can blow up to 1000$ )
Amit26
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@raghavgrover013, Lol, I think ETH will blow up to $1000 even without the ETF announcement :) The ETF announcement will take it even higher. It will be awesome to have an ETH ETF
patelcrypto
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@Amit26, Yes this is true, but a correction can also trigger 90 degree down turn. So in long term this market is going to reach the levels, but if you are trader then you definately let greed override your decision making process. If the markets keep rising this, there is risk of regulators stepping in as people may take loans from financial markets to invest in this volatile markets. So its always a good idea to lock in profits and let markets breathe.