But don’t take my word for it. Let’s see what the charts have to say. Let’s establish a point of reference first, the April 2013 crash:
And now, the current situation:
We can see the same pattern developing. Three green candles, each much larger than the previous, followed by a big blowoff red candle has historically been a good indicator of a huge price drop. This pattern can be observed not only during the April 2013 crash, but also during the 2011 crash. Expect more red candles to come.
Mark Twain famously said that “History does not repeat itself, but it does rhyme.” Indeed, we’re likely in to see similar, yet different, events play out. The previous two bubbles have been remarkably similar, in that they’ve both bottomed out at about 200% of the price they started out. In 2011, it started at $1, went to $30, then bottomed out at $2. In April, it started out at $30, went up to $265, then bottomed out at $60. If that’s anything to go by, it’s likely we’ll see a correction down to $200-350 before the market is able to turn itself around.
While everybody’s caught up in the hype, it’s easy to forget that just a month ago, we were trading at $170. It’s time to take the rose colored glasses off and face reality.
Disclaimer: This is not investing advice and should not be taken as such, only my opinion on the latest trends.