A strong bottom is forming in the crypto market. The action looks great in bitcoin, ethereum and Verge. If we see full five waves form, we’ll take profit to get ready for the wave 2 where we will re-initiate larger positions, writes Ryan Wilday of Ellliott Wave Trader.
The crypto market was making another attempt at a rally after failing to complete a bottom pattern off the January 17 lows. I’m pleased with the action thus far off the February 6 bottoms.
Let’s check in on a few bellwether charts: bitcoin (BTCUSD), ethereum (ETHUSD), and litecoin (LTCUSD). Let’s also take a look at Verge (XVGUSD), one of my favorite small caps.
Bitcoin, as of writing, sits at $10,647 and is in the the heart of the zone I call the B wave top zone. This is where a lower C wave in a larger Wave iv correction would show if it does. But the action is classically bullish so far. I’d like price to remain over $9840 while it fills out the five waves as shown. We’ll take some profit once that 5 wave completes.
If we see a 5 wave pattern out of this zone and break $9840 strong, we’ll kill our entire new position and assume we’ll see a lower correction.
In litecoin, we also see a push into the B wave zone. We see a B wave as unlikely with a strong push over $250 and we so far have a hit of the $235 level, and a bullish consolidation. We consider this consolidation the 4th of the third wave off the bottom.
Even without a break of the $250 resistance level, seeing a corrective sideways consolidation over the last week is bullish, and price looks to be ready to tackle resistance. If instead we see a 5 wave form that breaks $190, we’ll again be bearish.
Ethereum still looks great but is lagging bitcoin in Fibonacci levels. Currently it crossed the .5 extension slightly. As long as ethereum holds $860, we expect to see it rally strong in what we call “heart of the third wave,” which is expected to top at $1,537.
We will still need ethereum to contend with the B wave resistance above. But since we have bitcoin already in the B wave zone, we may get an early clue for ethereum from bitcoin’s behavior over the next few days.
Verge has behaved beautifully this past week and is ahead of bitcoin in Fibonacci levels. It topped at the 1.238 which is a little low for a micro 3 of circle 3, but still bullish. We’d love to see Verge extend to .116 over the next week. If so, the likelihood of a B wave top is significantly reduced.
In conclusion, we have a strong bottom forming in the crypto market. And, while we still need to see further resistance taken out above, us, the action so far looks great, particularly in bitcoin, ethereum and Verge. If we see the full five waves form, we’ll take profit to get ready for the wave 2 where we will re-initiate larger positions.
If you have any questions about how to use my analysis, we put a YouTube video up on the Elliott Wave Trader channel here to help subscribers with my analysis.
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