Short Term Update

I revised the weekly range forecast to $320-$400, this price range should work also for the next week. First support lie at $345 and is valid till sunday, then for the next week i see $320 as a good support. What is happening to btc? Well after a double top the market decided to correct a bit, at this point i think that is reasonable to expect a weekly mid-term correction that should end around $280-$300. I still think, after years, that we can’t have a prolonged bear market if the network hashing speed is constantly increasing, i’d be much more worried of a dropping network speed instead of the price that most of the time is wildly influenced by massive volatility typical of an illiquid asset like this one.

bitstampUSD  1 Day   #5 2016-01-16  09_53_13.305

I’d like to conclude spending two words about the recent media havok about bitcoin’s future ignited by a recent open letter from a blatant liar with an inflated ego, i prefer to not enter in details but as more the media erupts against bitcoin as more bullish is the future of bitcoin itself. I like very much to use the media as a contrarian indicator for investment decisions because the entire art of speculation consists of choosing the perfect moment to invest in a way opposite to that suggested by popular opinion.

Once things settled down there will be a long term update aiming to understand if there is the opportunity in the coming weeks to average down my long term position.

 

Long Term Update: 2016 Outlook with entropic methods

Chek this post of one year ago for a brief explanation of the theory beyond this forecast. This year I propose again the same analysis and it will be a main guide about support and resistance levels for all 2016.

Updated values for bitcoin (in brackets values of last year)

 BTC/USD
Growth Factor G 1.000166 (1.000553)
Shannon Probability P 0.515 (0.518)
Root mean square RMS (or volatility factor) 0.053 (0.056)

More or less bitcoin’s entropic values dropped a bit, with less volatility and a smaller value for the growth now 0.000166% compounded daily or 6% yearly growth down from 22% of 1y ago.

 2016 Price forecast  Full volatility  Half volatility
Forecast using only G* 458$ 458$
Upper bound adding volatility 1257$ 760$
Lower bound subtracting volatility 167$ 277$

*458 is obtained with today price (432$) times (1.000166^365)=1.06
432*1.06=458, just change 365 with the number of days you prefer for a different forecast.
For a more aggressive forecast you can use 1.001742 instead of 1.000166, this bigger value for growth doesn’t consider measurement error due to the short dataset I used, only 1145 days of historical data. Use this bigger value at your own risk:)

Conclusions

As usual i recommend to consider the support/resistance levels obtained with a halved volatility value thus for 2016 btc has an high probability to stay inside the $277-$760 price zone with a strong support at around $170 in case of panic selling.
At the same time i think that at the end of a strong buying climax period it’ll be hard to see btc price above 1250$ and very unlikely if not impossible to see it at or above 3400$ (using twice the value of historical volatility).

Long Term Update

“One Look at the chart Is Worth A Thousand Words”

chart

One week ago the chaikin volatility indicator crossed again the zero line, i think that since then XBTUSD entered in a new upswing after the strong bullish bar of the 26th November.
In terms of static price levels it seems to me that $320 is a strong one, followed by $360 that should hold the price during this upswing. As i said in my previous update i think that the maximum extension of this new weekly upswing should fall in the $650-$700 price zone: How much you wanna bet?


Weekly range forecast $360-$440

Long Term Update: new upside breakout is at hand

In my previous update i was expecting a top around $400; “…….. i think that a final top might happen at or below $400 before a strong correction will take place……..”, i’ve been wrong and XBTUSD topped at $500 with an impressive lecture of the Chaikin volatility indicator, see chart below (click to enlarge).

chaikin
At the moment the volatility indicator is below zero despite the recent price spike to ~$370 that i consider resistance for this week ($360-$390 price zone).  The forecast i’ve done in January is still valid and i think that without an insane volatility level it’ll be hard for the next top to be above $650-$700 before year end.
As usual i’m open to comments here and also in my irc channel.

Long Term Update: at resistance?

From my previous update: “..About the recent prolonged period of low volatility i’m observing an increased volume activity among all the biggest bitcoin exchanges, this let me think that bitcoin is probably accumulating to later break the trading range and move above $250. This break would be confirmed with a positive reading of the Chaikin Indicator..”

Well at the end it happened and a volatility increase in the right direction moved XBTUSD above the trading range ($210-$245), it is interesting to observe that a very strong volatility peak happened on October 22 but instead of topping this market continued to push upward (observe below chart),
chart
at this point i think that an intermediate top might happen with a second volatility peak probably within November 10th.

At resistance?

Checking price levels it seems that it’ll be hard to pass $320-$330, the 1Year Vwap is at $264 and the 2nd positive deviation line stands at $323, only %5 chance to move above in the short term despite this i think that a final top might happen at or below $400 before a strong correction will take place. If i’m wrong a strong support lies between the VWAP and $280 (where it happened the first volatility peak).
bitstampUSD 3 Day #1 2015-10-29 17_33_14.988

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Long Term Update: Again on volatility

After having proposed with my previous update an interesting template about volatility breakouts, I introduce today a well know indicator about volatility: the Chaikin volatility indicator. Most of those who follow me probably already knows that volatility is ultimately responsible for a traders profits, since if a market does not fucking move (like btc is doing since September) then there is no way to make money from it:)
It’s therefore crucial to recognise those times when volatility is picking up as this offers the opportunity to make a decent trade.
Developed by Marc Chaikin, the Chaikin volatility indicator characterize volatility by calculating the difference between the high and low for each period or trading bar. It measures the difference between two moving averages of a volume-weighted accumulation distribution line.

As you can clearly see when the Chaikin is below zero nothing is going on in the market and during these times you should refrain from trading and wait for the Chaikin to tell you when things are getting interesting. Chaikin is thus excellent to avoid overtrading.

chart

Once the Chaikin peaks, you know that you can start to think about closing your trade or opening a new one in the opposite direction (less recommended).
About the recent prolonged period of low volatility i’m observing an increased volume activity among all the biggest bitcoin exchanges, this let me think that bitcoin is probably accumulating to later break the trading range and move above $250. This break would be confirmed with a positive reading of the Chaikin Indicator (standard settings of 10/10 applied to a daily chart).

If you want to support this blog you can open an account at bit4x using my referral link, clicking here . Thank you.

Technical update: Consolidation Breakout Trading System

Today after many years i’ve reinstalled Metastock Professional, i was curious to see if there was some old Expert Advisors giving good result with bitcoin and i’ve found this one: “Consolidation Breakout” from Trading Systems Analysis Group.

Basically it works with volatility breakouts to identify entry/exit points and while this system uses John Bollinger’s Bollinger Bands and Welles Wilder’s Average True Range indicator, it is not linked to the methods of those two authors.
It’s based upon a strict observation of the Bollinger Band width compressing/decompressing (a method used by many traders) around the prices until the distance between the upper and lower bands is less than 1 ¾ times the 1 period average true range; it then looks for a breakout in either direction of the Bollinger Bands to capture the movement of the breakout. Once a position is entered, it looks to cross the 20-period simple moving average to exit the position but any other money management approach can be used for the exit.

I attach below the above expert advisor applied to a daily bitcoin chart. It works fairly well when volatility is high enough, even with less volatility performances aren’t so bad without substantial losses.
chart
At the moment the system is flat and exited a short position on 4 Sept. at $231.

I’d like to add that because bitcoin recently has been very boring from now on there will be updates about Currencies, Equities and Gold, all instruments that i trade regularly with my btc broker since September 2012.

Short Term Update: headed to $255

The price of XBTUSD has dropped again today back to my short term support at around $275 where i’ve my first positive price deviation line (computed using 2 months VWAP). From here it’s unlikely to see a bullish reaction and i expect a further bearish development down to the 2 months VWAP at $255 (see pic). I’d be really surprised to see a reverse from here but it would mean that the strong uptrend is still in place. A test down to $255-260 price zone could be an interesting short term buying opportunity.

bitstampUSD  1 Day   #5 2015-08-01  14_49_05.696

Regarding my long term view my opinion hasn’t changed much, i still think that the bear market is over and this market is accumulating in this prolonged sideways move; a strong breakout above $300 will follow later this year or in the first half of 2016. As long as it stays above $210 I’m continuing with my bullish bias.

Long Term Update

Two months ago in my previous update i was skeptic to see a bullish reaction and i was almost convinced of a drop to $210 and lower instead XBT/USD choosed to avoid my bearish scenario of sub $200 prices.

What could this mean? Well i think that the drop from the 2013 all time top is over and this market just entered in a prolonged sideways move where it appears to withstand the high selling pressure that has characterized the correction since the all time top; this long term accumulation should resolve in a big upward movement later this year or at max in the first part of 2016.

What i’d like to see now is a smoother move above $300 rather then a violent price spike that most of the time resolve itself in a further drop. A constant rise will also allow my long term moving average to finally turn bullish and convince me to average down my long term position of June 2014.

To invalidate my new bullish bias XBT/USD have to move below $210 this summer.

Short Term Update

It’s been a while since I have taken the time to post an update and I’ve been feeling a bit guilty about that to be honest! I remind to everyone that every monday i post a small update on my twitter profile, so keep an eye on it.

You see, the XBT/USD is approaching $200, and I think it’s headed lower still. We could see it reach $170 by the end of next month but at the same time i think that this long term drop is pushing the bitcoin market to the edge of a new rally. The main problem is that the downward trend is still pronounced that a visit sub $200 is inevitable.

About the short term, this market topped as expected in the price range i mentioned on twitter last monday, around $239. A new low will be probably established in the $190-$195 price zone as indicated in the attached below daily chart.

image