This week on Bitcoin . . .
Bitcoin prices were largely uneventful this week, with no major decisive move on either side. Since prices impulsively dipped to find support at $220 zone, sideways consolidation is tapering; as spreads thin out, terminal ends mark a break out on either side. A decision point is unfolding, as market thins and forces either bulls or bears to make a move. Thin spreads in truncated sideways moves end terminally almost always. It is a matter of when and not if.
Volumes on the other hand, have been declining daily, from close to 40,000 to an average much less than 15,000. EW correctives waves exhibit this form in volume, more times than not.
Standard indicator parameters 30, 50 and 100 day exponential moving averages are recommended for a short – mid term perspective. 30 and 50 day lines are converging, preceding a test of resistance. Short term EMAs cutting over longer term lines is a bullish indicator. In this case, short term momentum will attempt to change the trend. Attempt to cut above 50 day EMAs. Like previous attempts (encircled) – depending on market strength, it may or may not break.
Relative Strength Indicator (RSI), is below average 50, moving up in tandem with prices from oversold levels. RSI usually moves with price and only when it diverges, does it become a good topping/bottoming signal.There is still room for a further move up, before oversold levels at 70.
Fibonacci retracements levels are great for drawing retracement levels after huge moves – such as this one from $262 to $ 216. Fib ratios (blue) at 23%, 38%, 50%, 61.8%, 78.6% and 100% move in an opposite direction to the motive (yellow). This one seems to have found resistance at 23% – clear from the first attempt at breaking it.
An ascending triangle formation pattern is also forming – triangles are terminal patterns and always end up with a break out.
Bitcoin Market Sidenote
Current prices are certainly cheap IMO, for accumulation targeting higher percentage reversals. It is increasingly becoming clearer that Bitcoin has a role to play in a digital world – the blockchain itself has drawn wide interest from banksters. Looking back at Mt. Gox days, the market has matured, and price action takes longer than it did in the past – possibly explains this extended bear market.
“There is a huge amount of negative sentiment to get past though and this bubble is taking longer to correct than the massive bubble of 2011 for example.” – AF Bitcoins
Bitcoin Derivatives for instance, have become available on exchanges. Shorting by speculators may be responsible for depressing prices to these low levels; unlike previous years, it has taken longer to break out of a persistent bear decline.
Bitcoin Price Forecast this week
In my opinion, we are still in a larger bear trend. Trading strategies will vary depending on your time frame of reference. For instance, while i am confident of a continued bear trend in the short – to – midterm (bar sudden news), I expect prices to go slightly up in the short term. It is important to keep an eye on different time charts so and not to get caught on the wrong side of larger reversals.
“I believe the general rule of thumb is to track prices on at least 3 time frames; One where you trade, one above for confirmation with the bigger picture, and one below for minute short term variations.”
Immediate short term resistance trendline from last month’s $300 top has experienced multiple tests at breaching it. Price is about to have a go at this trendline (again), making for a short rise in prices.
As per EW, a corrective wave, after impulse move to $235, is shaping up as A, B and now C. C is seemingly moving up in a 5 wave structure. I am expecting $240 – $250 on this short leg up as targets. With caution, because the bear trend is the dominant move.
“EW counts evolve with price action. Multiple counts running in parallel at any one time; only by excluding those that are invalidated and focussing on those with the higher probabilities that stay on track.”
Levels to watch going up are at $240 and $265 – key resistance points. Prices will resume the trend down, first to retest $215 levels, followed by crucial resistance zone around $210/$200.
Here are two forecast for lower prices – $240 resistance (in yellow) and $265 (in red). Either would mark the end of a larger correction move from $166 bottom. My gut feel is collapse of $200 while dragging the bear market for several months longer; I do not expect the crucial zone to hold.
Ride the trend while you can, and keep in mind the bear trend. This forecast is invalidated if any significant price-impacting news comes out.