Since my last update XBT/USD showed strength above $600 this means that the short term bearish trend is almost over but I need to see the upvolume/downvolume ratio computed on a 3 days chart becoming positive before opening a long term position.
Another positive aspect is that the ALMA moving average slope is now positive, an important bullish sign. For an investor who wants to play very safe with their money i recommend to wait a confirmed bullish volume activity because, as I said before, the up/down volume ratio is still negative; why? Well because it’s not enough a strong and quick spike up to $710 to erase weeks of weak market performance.
The intentions of the market to goes up must be confirmed with solid buying from investors but for who wants to try to anticipate the market i recommend to place a buy order in the $600-$620 price zone, in the short term this market should found support there, above the 3 days ALMA moving average now at $605.
I attached here on the left a long term chart where each bar represents three days of market activity, as i said in the past this particular time frame is a good compromise between a weekly chart and a daily chart.
Despite the recent strong rebounce from my long term support around $420, the ALMA moving average is still pointing down confirming that XBT/USD is in a short term corrective phase inside a long term bull market because the price during last months has been always above my long term vwap, now at $430 and also above the 200 days moving average now at ~$470 and rising.
About volume activity the “volume ratio” indicator tell us that the situation is still very oversold and all the recent bearish news and the excess of pessimism among many investors let me think that probably the bottom is in but to avoid any risk before opening a long position is wise to wait a positive volume activity that should be back once a new uptrend is established and confirmed by the reversal to the upside of the ALMA moving average i use.
To conclude XBT/USD remains in a corrective phase inside a long term bull market, the rebounce should stop near $600 where there is the ALMA moving average to act as resistance level. Any strength above $600 could mean that the short term bearish trend is over and that this market is headed up again.
The recent sell off has brought the bitcoin into some notable short term support that I believe deserves attention. The top chart above shows the BTC/USD coming into support that is defined by the second deviation line of VWAP, computed using only last 7 days of data for a very short term indication.
The bottom pane of the chart shows the RSI in oversold territory but its average is higher because of the 5k bitcoins dump just happened at bitstamp.
It would appear to me that strong support in the near term, comes in around the $500-$520 price zone while resistance is above the VWAP, now at $590.
I don’t expect to see bullishness soon, i’m still looking for a long term bottom around $420.
BTC/USD is trading beneath its 50 day moving average today as I write this, that average is now at $780. Coupled with the high volume on the downside, especially in the last 10 days, this is solid evidence for a reversal of the short term market trend from up to down.
I think that BTC/USD will drop 200 dollars from here down to the long term support, my long term VWAP calculated using last one year of data.
If I am right about this the prognosis calls the bottom should develop as a conseguence of the MtGox drama, that exchange (if we can call it an exchange…) is almost out of business, my guess is that it is down of bitcoins and with strong manipulations of the price they are trying to recover the money lost due to the malleability issue from their own customers, this practice is of course totally illegal in a regulated market, i don’t want to go in the details but looking MtGox price and volume data there is a strong evidence of such activity.
Back to our long term chart, is this the start of a bear market? I think it is too early to tell. The 200 day moving average is around my long term VWAP so a drop under it would be the first clue that a bear market has begun. Also the other kind of average i use, the ALMA moving average, turned negative during the prolonged trading range of January.
I added a new indicator, similar to my “net volume” indicator, the only difference is that it computes the ratio between buyers and sellers and it has been remarkably accurate staying in bearish territory since November top; it looks good as a trend following tool.
For the short term i think the price is now in a congestion in the $520-$720 price zone, a strong bottom where to shake out all weak hands is necessary and very healthy in my view and if this event will be accompanied by MtGox going out of business indefinitely, then the bitcoin market will be ready to move up again.
I’ve just read the last statement of MtGox and the ambiguous phrasing of the press release wasn’t a coincidence of course. I’m not talking about a conspiracy to crash the market and rebuy at a cheaper price but the style of the explanation that they’re trying to manipulate their way out of a shortage of coins makes very sense to me and probably to many of you, but perhaps Karpeles wouldn’t go that low. I don’t know why MtGox is trying to damage the reputation of the entire bitcoin community but probably they don’t want to be blamed for not implementing properly their wallet customized software. I’ve found an interesting topic on reddit about the issue: ” transaction malleability”, more details here.
No need to panic guys, keep calm:)
As i thought the trading range has been broken after 30 days, it’s very unlikely to see more then that for a market congestion and with no exception this market respected this common rule. For the majority of the time prolonged trading ranges resolve with a strong break to the downside once the smaller trading ranges are broken.
I’ve now two support levels, 640 and 515 dollars for the short term and i think that in this price zone some buyers will show up. For the long term supports are on my long term VWAP ($400) and the 200 days moving average now at $420.
Many are arguing that we are falling because of MtGox, i don’t agree with this view, it’s just an excuse to sell we all know that MtGox is out of business since months. When the market is in low sentiment regime good news are ignored and overreactions to bad news from investors are common.
Apple has removed the Blockchain wallet app from its iOS App Stores without offering an explanation for the action and just saying the removal was due to “an unresolved issue”. Big lie, we know that apple may launch its own Payment Service system soon.
I truly agree with blockchain statement that i report here:
“These actions by Apple once again demonstrate the anti-competitive and capricious nature of the App Store policies that are clearly focused on preserving Apple’s monopoly on payments rather than based on any consideration of the needs and desires of their users.”
“[The app] had no customer complaints, and a broad user base. The only thing that has changed is that bitcoin has become competitive to Apple’s own payment system. By removing the Blockchain app, the only bitcoin wallet application on the App store, Apple has eliminated competition using their monopolistic position in the market in a heavy handed manner.”
There is an active petition on charge.com, please sign it thanks.
The BTC/USD at bitstamp exchange has been trying to bottom, but has been blocked in a trading range since 7 January ’14. There have been several attempts to move above the short term VWAP without success, every time my average halted the price advance; this means we have an accurate dynamic level that help us to understand when to enter this market: at the breakout of that level (now located at $828).
I think that if the weakness will continue in the coming days, we could see a low near $ 785, where there is the first negative deviation line. RSI average is close to oversold, indicating that a bottom is near.
Bitinstant CEO Charlie Shrem has been arrested today in New York and charged with conspiring to commit money laundering. Well i think that we have just seen a strong shakeout after a bearish news for bitcoin (actually i consider it a positive news, i don’t like to see bitcoin associated to criminal like money laundering) with a sudden move down to the second deviation line of VWAP at 750 dollars.
I don’t think this news is enough to sink this market to much lower price levels, the congestion phase should continue with the short term VWAP moving average acting as resistance, now at ~$830.
I pointed out in the attached chart several occasions where BTC/USD failed to move above my reference moving average confirming the weakness of this market. The Net Volume activity was positive but turned negative after the news came out this morning.
We are in a price congestion and as long as the market stays inside my trading rage of $760-$920 the considerations i’ve made in my previous update are still valid and don’t forget that good resilience against bad news is always a positive sign.
Congestion occurs when four consecutive bars open or close within the range of a “measuring bar”. A “measuring bar” becomes such when its price range contains the opens or closes of at least three of four subsequent price bars. As i said in one of my old post sideways price movement may be broken into three distinct and definable areas:
- Ledges – less than 10 price bars
- Congestions – 11-20 price bars
- Trading Ranges – 21 bars or more with a breakout usually occurring before the thirtieth bar
Now 13 days are gone without a breakout above or below the “measuring bar” (i consider the bar of last 7 January the measuring bar) and we are in a congestion; I don’t think the market is still following the triangular descending pattern that I mentioned in the previous update.
I expect to see a breakout in the next 5-10 days, unlikely that this congestion will last more then 20 days in a volatile market like this. Top of the congestion rectangle is the first deviation line of VWAP around $930, while the $765 static support just below the VWAP defines the bottom of the trading range.
I think that without a really bad news investors will not sell their precious bitcoins under $750, I believe that the positive sentiment of the market will slowly push prices higher outside the current congestion, possibly above $900 and toward new highs but this process will require some time.