Bitcoin: The hits just keep on coming...

The bears hit back hard. The bullish scenario I pointed out yesterday is all but invalidated. Technically bitcoin would need to drop below $7,930 (the starting point of wave 1) in order to invalidate my bullish count. It hasn't quite reached that level yet, but it's close.

Clearly this is no longer a likely scenario. I've discussed in the past a WXY pattern connecting 2 ABC corrective patterns. Now it's possible we may be entering a WXYXZ pattern. This is simply an extension of the WXY pattern to include another wave failure (denoted with an X), followed by another ABC correction. We aren't there yet, but it is a possibility. If that does play out, it could look like this:

What looks more likely at the moment is the bearish scenario I've been pointing out this past week. An ABC correction can come in many forms. Some examples are a regular ABC or an irregular flat, expanded flat or running flat. We'll have to see how this one plays out. I'll have a much better idea when the A wave finds its bottom...which it may have already. Here's what this bearish pattern may look like...I've included the possible landing zone for wave A in orange:

Looking at the 1 hour RSI we can see it's very oversold:

The 4 hour RSI is nearly crossing into the oversold region. This suggests bitcoin may be reaching a temporary bottom...but I'm not getting to comfortable yet.

Looking at the 4 hour MACD, we can see it's remaining within the wedge I pointed out a couple days ago. As it gets closer to the apex, we may see a major move up or down. Just something to keep an eye on.

I've been saying for a week the market is full of mixed signals. Today is a perfect example. Looking at the 1 hour MACD, you can see clear bullish divergence. This suggests a rise, at least temporarily, may be coming.

However, when you look at the 4 hour MACD, you can see clear BEARISH divergence. This conflict is very rare and shows just how much uncertainty there is in the market today.

Finally, looking at the 8, 21 and 55 day EMA's, we can see the 8 day EMA has crossed back below the 21 day EMA. As I've discussed in the past, this is another bearish sign of market weakness.

If you're unfamiliar with how to use EMA's, reference my post on the topic here: https://steemit.com/cryptocurrency/@workin2005/simple-effective-strategy-to-buying-and-selling-market-trends

The question inevitability asked by everyone is, why is the market dropping? I believe there are many reasons, but the 2 most influential (in my opinion) are the Mt Gox sell off and the fear over the SEC classifying Ethereum, and other coins, as a security.

If you'd like to monitor the Mt Gox sell off in real time, I created a post with all the relevant information you need here: https://steemit.com/cryptocurrency/@workin2005/monitor-the-mt-gox-selloff

The more pressing problem is the uncertainty with the SEC. We need new money to enter the market. That's not going to happen on a large scale until there's regulatory clarity. Let's hope we get that clarity soon. Once we have the regulatory framework, I believe we'll see a bull run unlike anything we've seen to date.

BIAS:

Short Term: Neutral to Bearish
Longterm: Very Bullish

I hope this has been helpful. I’d be happy to answer any questions in the comment section below. Thanks for stopping by.

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Disclaimer: I am NOT a financial advisor and this is NOT financial advice. Please always do your own research and invest responsibly. Technical analysis is simply a guide. It doesn’t predict the future. Anyone that claims they know exactly what’s going to happen is foolish, lying or both. Technical Analysis should only be used as a tool to help make better decisions. If you enter a trade, I recommend having a stop loss and sticking to it. You will loose at times. The key is to have more wins than losses. With that in mind, I wish you great success.

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