Bitcoin's BiG Crown Reversal? What's a Crown Reversal?

One of the crypto assets I trade most is Bitcoin. At this moment there is a lot of interest in this asset class, but far too many people with little technical experience with it or any other asset that are getting involved. Here I want to show you how I break things down. Keep in mind, I am both an investor but also a swing trader. This means I get involved when things bottom out pretty hard and there is despair in the air, but also when sentiment is rebounding to the upside. The former strategy is in years and the latter is usually in weeks when it comes to cryptos.

A few days into September the price reached a few dollars shy of $5000. This was a significant milestone, and so many including myself took profits around this skyline level. Unfortunately, too much profit might have been taken off the table, which might mean the price will not make new all-time highs for some time to come and that we are forming a BIG CROWN REVERSAL. How did I make this connection? There was a lot of news circulating trying to explain why the price was heading south, but we have no way to accurately measure these or their alternatives. So let's look at a chart.

Here is Bitcoin over the last two months:

Here is a working chart: keep in mind, if I don't explain the purpose of these lines in this thread, I will do so in another:)

WOW there's a lot going on... I know. 

TO BUILD A NARRATIVE, we saw massive amounts of buying and selling at the "major key fibo support level" (the thick red band around $3000) a few weeks ago to stop the falling. This initiated what Wyckoff analysts call an "automatic rally," because things never go to heck in a straight line. This happened once before at the beginning of the month coming down from the all-time high close to $5000, which stopped around $3900 and bounced back up over 50%. So, we had two rallies that witnessed similar behaviour: increasing volume (buying and selling, or a changing hands of supply) while the trend reversed. This is a signal you can catch in the moment sometimes, and buy at fantastic prices for a short term swing trade. The first rally completed, so the probability is high the second could replicate the pattern if you start considering Elliot Wave theory (A, B, C corrections, 1 - 5 waves, etc). The moment to watch for the second rally to complete is where we are right now in the short box area:

THE REASON I SEE A CROWN REVERSAL is we breached the major key fibo level (sitting at $3029). This is not a textbook rule, but rather a method I picked up over the years of working in the crypto asset space. It is not labeled as such on my chart, but we can call that price level point B as per the external reference chart which demonstrates what a simple crown reversal pattern looks like: 

Source - http://partners.futuresource.com/fbp/2004/041604.htm

To validate this big crown reversal, however, we need to finish the sub-crown reversal marked by the thick purple bands:

Then the following places will need to be broken:

- The major fibo support (purple)/ key fibo support (red) between $3800 and $3600 

- The current rising wedge (thick blue lines) 

- The uptrend line (price will depend on the date of arrival) 

- The major key fibo support (red) around $3000 

- The trading range support around $2700 

- The major uptrend line (price will depend on the date of arrival) 

- The major key fibo support (red) around $2450 

What should result, relatively speaking is something like this:

THE BOTTOM LINE IS the odds are high Bitcoin will test the $3000 level again, rather than attempt to form new all time highs. If we get another selling wave, we could test a "critical key fibo" level formed by the March 2017 low (approx. $2450) which is a good place for a swing trade. If we break that level too, we could test the "critical key fibo" formed by a low in 2015 which is a good place for a swing but also an investment purchase.  Trading above the "short box" at $4548 indicates strength but could be an overreaction, and trading above $4697 is quite solid but may not be enough to break the old all-time high. Breaking the $5000 level is a BIG buy signal for a swing trade, but NOT AN INVESTMENT.

You can find more detailed charts here: https://www.tradingview.com/chart/BTCUSD/1mM8QXEh-Bitcoin-s-BiG-Crown-Reversal-Preparations-For-Possible-Extreme/

Cheers and GLWT (good luck with trade)!
Your friend, 

Erik.