The Bitcoin Price: Is the market heading for a capitulation?

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Written by

Kevin Lopez
Published on

November 18, 2022

Key points: 

  • BTC forms a symmetrical triangle, which indicates indecision due to equal pressure on both sides.
  • If the Nov. 9-10 ascending move is a five-wave trend, it could indicate a bullish count, which is expected to test the resistance near the previous support range above $19,694.
  • Alternatively, the November 9-10 up move could be called an ABC three-wave move. If this is the case, the symmetrical triangle is an ABCDE correction, which will immediately push the price down for a breakout. 
  • The probability of deriving bearish counts is by default more likely than bullish counts.
  • The price is now steadily progressing below 200 MA. This is different than when it makes a wick underneath but respects it in the end. This suggests that this bear market headline may be worse than in the past.

Bitcoin’s price fell to $15,653 on Nov. 9, its lowest level since November 2020. But prices have consolidated. It forms a symmetrical triangle, which indicates indecision due to equal pressure on both sides.

Btcusd 1h.png

A move below the June 18 low could mean new lows are on the horizon. However, this doesn't just happen in a straight line.

As you can see from the hourly chart above, there was an apparent end to the impulsive move lower starting on November 5th. This was followed by a recovery to important prior support, which has now tested resistance in the $18,000 area. The price is now hovering around the midpoint of the triangle and approaching its apex.

With an eruption imminent, the main question is which direction will it go?

Bitcoin Price: Bullish Counting

If the Nov. 9-10 ascending move is a five-wave trend, it could indicate a bullish count. Based on this setup, we have seen the first two waves of the Minute count and the first two sub-wave of the Minuette count from the third wave, which are expected to test the resistance near the previous support range above $19,694.

Btcusd Bullish Coint.png

This target is also validated by Fibonacci extension levels, as the third wave of a five-wave move usually occurs at the 1.618 Fibonacci extension level. The two levels overlap perfectly, which shows their importance.

If true, a breakout to the upside could follow, with the potential for further gains and a breakout of the Nov. 9 low. After that, the fourth and fifth waves may go higher, but the whole trend from November 9 may also be a three-wave ABC adjustment.

Even if it's a correction, the silent target is still a potential third wave, whether it's a C wave or the third of a five-wave impulse.

Bitcoin Price: Bearish Counting

Alternatively, the November 9-10 up move could be called an ABC three-wave move. That's the main differentiating factor between the two counts, the second being the next up at 14th.

Btc Bearish.png

If this is the case, the symmetrical triangle is an ABCDE correction, which now ends with another interaction with the triangle drag. It will immediately push the price down for a breakout.

The target price could then be the next support zone starting around $13,400 and ending at $12,500.

What's more likely?

Given that we are looking at a symmetrical triangle, it is correct to say that both possibilities have equal probability. However, it can be interpreted as more likely if wavenumbers are considered.

More Likely.png

Especially in a bearish case, a symmetrical triangle would indicate that an ABCDE correction is the fourth wave down from the previous five-wave impulse since an ABCDE correction only occurs in the fourth wave.

According to the rules of the Elliott Wave Theory, we can only explain this suspicious fourth in the impulsive wave that started on September 13th. It's unlikely, but not impossible. Unlikely, as the second and fourth waves are not as strong as shown on the 4-hour chart above. Especially given the length and if wave 4 is a sideways correction like ABCDE, it should last longer than wave 2.

The probability of deriving bearish counts is by default more likely than bullish counts.

Conclusion

The safest way to take further action is to wait and see where the symmetrical triangle breaks out. Either way, a breakout is expected soon and there is no hesitation about what Bitcoin is about to do.

Therefore, a strong candle that closes above the support/resistance line will provide the clearest signal of where the price is headed for some time to come.

If we see an upside breakout, the price target is around $19,700. Such a level would set the price for further potential upside moves.

But if the price falls, a drop to $13,400-12,600 would be the next potential area to find support.

In a negative scenario, it would mean that we are further down the road of total capitulation, similar to what we saw in November-December 2018 when the price of Bitcoin fell from $6,000 to $3,200. At today's price, Bitcoin could fall back to $10,200.

Btc 200 W.png

The scary fact is that for the entire period starting in June 2022, the price of Bitcoin has been below the 200W moving average, which has historically guided a potential bottom area including all bottoms in 2014.

The price is now steadily progressing below it. This is different than when it makes a wick underneath but respects it in the end. This suggests that this bear market headline may be worse than in the past.


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