Cautious Moment - Leaning Bearish Based on the Weekly
2024-12-17
Category: None

The weekly chart is showing signs of caution, with the most recent weekly candle closing as a 'Hangman' candlestick. This pattern is often associated with the potential end of an uptrend and the beginning of a correction. Supporting my bearish sentiment:

 The Weekly Chart 

 
 The RSI (Relative Strength Index) is extremely overbought at 85.25, a level that typically signals an overstretched market.
 The Stochastic RSI is also in overbought territory, with the K line crossing below the D line, marking a bearish reversal signal.
 

While an overbought RSI doesn't necessarily indicate an imminent dump, it does serve as a cautionary marker that a possible correction may be on the horizon. The Stochastic RSI, however, strengthens the bearish bias by indicating slowing momentum—a signal that aligns with observations on the daily chart.

 The Daily Chart 
On the daily timeframe, the price has corrected from the recent high of $2.94, marking what I believe to be the end of Wave 1. The current correction appears to be a Wave 2 correction forming within a descending channel. Here are the key observations:

 
 The last 7 daily candles have been either 'Spinning Tops' or 'High Wave' candlesticks. Both patterns are indicative of market indecision, with low momentum clearly slowing.
 The RSI and Stochastic RSI on the daily chart also reflect this flat momentum, further signaling the market's lack of direction.
 
 

 Elliott Wave Context - Wave 2 Correction 

Referencing Bennett McDowell’s 'Elliott Wave Techniques Simplified':

 
 15% of Wave 2 corrections retrace between 23.6% and 38.2% of the Fibonacci levels.
 70% of Wave 2 corrections typically retrace between 38.2% and 61.8%.
 

So far, XRP has corrected slightly past the 38.2% Fibonacci level, suggesting that the Wave 2 correction could still be in progress. Based on historical patterns and current price action, I believe a deeper correction toward the 61.8% Fibonacci retracement level at $1.40 remains a strong possibility.

 Summary & Strategy 

This is a highly cautious area for XRP:

I am not currently in the market and would only consider entering if there is a clear breakout above the descending channel, supported by volume.

Even then, I would wait for a backtest of the channel to confirm the breakout is not a fake-out before entering a long position.

However, given the current chart signals, I anticipate that XRP could correct all the way to the 61.8% Fibonacci level at $1.40. I don’t expect this correction to be clear-cut or quick; rather, it could evolve into a 'Complex Correction', with price chopping around before ultimately completing the retracement at the 61.8% level.