When Bears Gather: A Confluence of Warning Signs for BTCBitcoin’s current price action has led me to adopt a bearish short-term outlook, supported by several technical indicators and analysis methods. Here’s why I believe we’re at a critical turning point and entering a Wave 4 correction based on Elliott Wave Theory.
Stochastic RSI: Bearish Crossover
The Weekly Stochastic RSI has entered the overbought zone, and a bearish crossover has formed. Historically, this has been a reliable signal of a downside correction. I’ve highlighted previous instances where a bearish crossover in the overbought region led to significant price corrections, and we’re now seeing a similar setup.
A single indicator isn’t enough to make a strong prediction, but several additional factors strengthen the bearish outlook:
1.618 Fibonacci Extension: Bitcoins price price aligns with the 1.618 Fibonacci level, often a key resistance point. Whilst it has broken support on the daily/weekly time frames it wouldn't surprise me if it retraces back to the 1.618 Fibonacci, creating a bearish candle where the 1.618 is now resistance by the close of December.
Loss of Momentum: Candlestick patterns and momentum indicators all show weakening momentum, including a hanging man candle on the weekly chart.
Daily and 4-Hour Stochastic RSI: Both timeframes have also turned bearish, signaling further downside.
Elliott Wave Analysis: Top of Wave 3
In my previous Bitcoin analysis, I discussed how we’ve likely reached the top of Wave 3, and are now entering a Wave 4 retracement.
If this is indeed Wave 4, Elliott Wave Theory suggests that 70% of corrections retrace between the 0.382 and 0.618 Fibonacci levels, which I have marked out above. Based on this range:
In 2021 Wave 4 corrected 31%. If we did a similar correction this would take us down to 0.618 Fibonacci level, conveniently near $71,859.67, which also serves as close proximity to the previous all-time high.
Final Thoughts
As traders, we can only work with the charts and data in front of us. My current bias remains bearish, and I’ll continue monitoring key levels and confluence points to adjust my outlook as needed.
