Bitcoin is Due a Correction

Bitcoin has extended its recent gains and is poised for a 4th Wave correction that may be extreme, warns Avi Gilburt.

In our last update, we stated that Bitcoin was providing us the minimum price patterns to suggest that a bull market was under way. Moreover, we were looking for a standard corrective pullback to solidify the bull market case.

But when the price action is too strong, it can flash warnings signals. This is clearly what we have seen over the last week or two. Price is always king, and we must not act emotionally as price barrels upward. We must continue to put price action to the test, as it is the only truth in the market.

Recently, we have seen this market overheat, barreling upward with nothing but the smallest correction. If you are familiar with Elliott Wave, you know that an impulsive move signaling the beginning of a bull market comes in the form of five waves. Unfortunately, in the clearest view of this rally off our December low, we only have three waves. So, sometimes, extending beyond standard targets may suggest something less bullish in the bigger picture.

For us to remain bullish, we need to see a clear corrective pullback that presents as our 4th wave off the December lows, followed by a fifth wave higher in order to eliminate the risk that the bear may return for one final flush. For a bullish structure to be reliable, we now need to see a wave 4 corrective pullback that holds over support at $5,330 and then rally over $10,000. Conversely, if we drop through the $5,330 level in an impulsive structure, the prospects of a lower low in the complex rise significantly.

We are not suggesting that you sell all of your Bitcoin and run for the hills, but in any bull market, we sometimes see warning signs that cause us to turn cautious. This is part of managing risks in a dynamic market where nothing is certain. Just as an airline pilot requires you to buckle up upon take off, as this part of air travel is the most dangerous, you must prepare for turbulence as a market fights to form a new bullish trend.

And we do expect turbulence ahead. Unfortunately, there is not a liquid option market for you to hedge with Bitcoin puts, thought there are futures where you can place stops and reentry orders.

We hope that we’ll soon be able to come back with a pleasant report that Bitcoin has fulfilled our bullish expectations with a five wave structure. And, just to remind you, if this structure continues to remain impulsive, we expect this move to continue through 2019 toward our $65,000 target.

Avi Gilburt is a widely followed Elliott Wave analyst and founder of ElliottWaveTrader.net, a live trading room featuring his analysis on the S&P 500, precious metals, oil & USD, plus a team of analysts covering a range of other markets.  He recently founded FATRADER.com, a live forum featuring some of the top fundamental analysts online today to showcase research and elevate discussion for traders & investors interested in fundamental rather than technical analysis.