Understanding Wave Degrees

Now that BTC refuses to break that 61.8% Fibonacci Retracement, many are still in doubt if that green candle can be sustained. Some would even suspect that what we are seeing now is just a Dead Cat Bounce (DCB).

That’s understandable. In Elliot Wave Principle, the personality of Wave C is described as:

• Devastating and destructive
• It is during this decline that there is virtually no place to hide except cash and that
• Fear has taken over

When almost everybody is afraid, it is but natural to suspect any price action that indicates a resumption of the rally. Again, in EWP, that is part of the personality of Wave 1. In fact, during this time, you can observe plenty of short-sellers for the majority are finally convinced that the overall trend is down. And so, if they see any indication of a rally, they took that as an opportunity to dispose of their holdings.

Studying waves isn’t easy. Talking about bulls and bears will only make sense in the context of varying wave degrees. In fact, a bear market can be subsumed under a larger bull market. The same thing applies to the bull market. It can also fall under a bigger bear market.

As indicated, the key is to understand the diverse wave degrees. A Super-cycle for instance is multi-decade, about 40 to 70 years whereas a Cycle is between one year to several years. The same goes with Primary and Intermediate waves, which will last a few months to a couple of years and weeks to months respectively. And there are smaller waves or bull and bear markets described as Minor, Minute, Minuette down to Subminuette.

Using different wave degrees to analyze the current bear market, we can say that the A-B-C Waves formed beginning in November last year are Intermediate Waves within the Primary Wave 2. If this analysis is accurate, once Wave 2 is complete, what we will see next is the formation of Primary Wave 3. That would mean a resumption of a bull market that started in September 2017. And that my friend is a wonder to behold. Only when such a rally starts, that confidence will return. We will witness once again a very volatile market, breakouts, gap-ups, volume expansion, runaway price movement, and huge gains.

Grace and peace!

A Disclaimer:

Though there are times that technical analysis like this is useful, ultimately, it is just a game of probability. Nothing is certain in the market but uncertainty.

Reference:

Robert Prechter and A.J. Frost. 1977. Elliott Wave Principle.