Weekly Range Update

bitfinexUSD 1439 Min 59 Sec #5 2016-05-30 07_59_47.790XBT/USD weekly range.forecast $495-$570 | daily moving average is bulllish after the strong spike. Support is at VWAP near $460. Volatility has increased and after an initial bearish trap XBTUSD rose well above the VWAP, RSI is high and it hadn’t been in overbought territory for a while this should increase the probability to see a retracement from here. Strong resistance is always at around $570.
Although support is at VWAP near $460 i think that $495 should hold in case of a retracement.

Italian version here at bitchanger

 

Volatility is back and in the right direction

XBTUSD touched my weekly resistance at around $480, i think this resistance is temporary and considering the huge amount of volatility increase there are chance to see higher prices ahead. It’s time to switch to a weekly chart to better understand where is the first decent resistance .

chart-xbtusd-weekly

Above you can see a weekly chart of XBTUSD using an average of 5 exchanges. I plotted the bollinger bands and highlighted 3 breakout bars on point 1,3,4.

XBTUSD did a first breakout bar above the upper bollinger band on mid July 2015 (point 1 on the chart) but immediately turned back inside the bar, typical bearish pattern. At this point a bearish reaction started and ended at the lower bollinger band (point 2 on the chart) .
From here the true movement started with a clean breakout bar (Nov. 2015 point 3 on the chart).

Now we are seeing the same breakout bar (point 4 on the chart) but i can’t say yet if it is a legit or a fake one. Judging from what happened since Jan of this year with XBTUSD doing a long sequence of higher lows i’m tempted to say that this market is strong and probably it will break above 500 dollars; the next 1-2 weeks are crucial to see if this breakout is valid or not.

In january i was telling you that a good resistance for the whole year was $760 and it is still valid, there is 1% possibility to move above $760, 5% to go above $630 and 30% to pass $550. In case of a strong move above $500 the possible targets are these.

Intraday Update

This is bitcoin 1 hour price action chart since May 21, i labeled in the chart 3 points where the R-Squared indicator topped above the 0.8 thresold, i explained in this update how R-Square works. Yellow line is the ALMA moving average while below the price chart we have the r-squared indicator, classic stochastic oscillator and Chaikin Volatility indicator, last two with standard values. It is interesting to notice that on the bottom we have had a volatility peak, oversold stochastic oscillator, r-square above 0.8 and the price touching the lower support of my regression price channel. These are all good signs that may btcusd-h1-simplefx-ltdsignal a turnaround in the trend. As i explained in a previous update about r-square when this indicator cross the 0.8 thresold signaling a possible end of the current price swing (up or down) doesn’t necessary mean that the price will reverse and fall, as you can see in point C of the chart, why is this happening? Because if the overall trend is strong all the price corrections in an uptrend sometimes are not strong enough to push the price down therefore we have situations where the price stays flat or reduce its speed without doing a price reversal. At point B in the chart you can see that both r-squared and stochastic oscillator were signalling a reversal but XBTUSD stayed flat or sideway.

Furthermore the Chaikin volatility indicator can give you further information when to trade or not, here it indicated very well an intraday bottom (hopefully it could be also a bottom on the daily chart as i speculated in the previous update) again at point A.

Possible strategies are to buy when there is a retracement after a strong reaction, in this case wait a situation like the one at point A, wait the retracement after point B and buy at the subsequent price reaction to the upside to end your trade at point C where the R-Squared saturated above the 0.8 thresold. In this case we are talking about 2-2.5 usd profit for each btc traded, not much if you consider the high spread and fees charged by bitcoin exchanges, an old reason why i don’t trade intraday this market yet.

 

Weekly Range Update

XBT/USD weekly range.forecast at $425-$460 | daily moving average is bearish. Resistance is at VWAP near $445. Volatility increased but i think that we are seeing a bear trap, i expect an upmove that will carry XBTUSD just above the VWAP, RSI is low and it hadn’t been in oversold territory for a while this should increase the probability to see a rebounce from here. Strong resistance is always at around $480.

Generally speaking i think that there are no reasons to see the recent drop as a dump, in my opinion bitcoin fundamentals are looking strong and there is a lot to be bullish about this summer with segwit coming and halving.

bitfinexUSD  1439 Min 59 Sec   #5 2016-05-23  09_36_59.648

Italian version of the update here

OFFTOPIC: a quick view of an altcoin

This is an attempt to forecast where the next big movement will end of this altcoin, an altcoin that recently is getting lot of unjustified attention from the bitcoin community. I don’t know if people is bored of bitcoin and is trying to pursuit a “get rich quick scheme” pumping their bitcoins in this altcoin, aniway it is not the purpose of this article to prove it or not.

Here there is the weekly chart with logscale for the price axis.I highlighted the first big up movement and the subsequent price drop, a perfect 62%  fibonacci retracement down from the top to 0.015 btc/unit. Assuming that the current bullish movement will be of the same size of the previous one using a logarithmic scale the target should be at 0.135 Btc/Unit. There would be price retracements for sure before reaching such an optimistic target therefore a more likely long term top could be the point half way between our initial target and the bottom used as a starting point for our forecast. As indicated in the chart this potential resistance level is around 0.047 Btc/unit. IMO it would be a decent point where to open a short position because it is above the previous high of 0.035 Btc/unit and in a strong uptrend i’d prefer to avoid to open a short position from a lower high. In any case it is better to confirm the trade with a bearish signal with an oscillator of your choice.
altcoin

Weekly Range Update

XBT/USD weekly range.forecast unchanged at $435-$460 | daily moving average is flat. Strong support is at VWAP near $435. Volatility is low and should increase soon and in case of another upmove strong resistance is at $485 but at the moment this market is having difficulties to pass my previous level at $460.

XBTUSD
Daily Chart XBTUSD @bitfinex exchange
For all the italians that follow this blog i kindly remind you that since few week i’m writing at an italian website about bitcoin news and market coverage, bitchanger.com This doesn’t mean i’m going to drop this blog updates here will continue as usual.

Weekly Range Update

XBT/USD weekly range.forecast $435-$460 | daily moving average is bullish after the upmove of May 6. Strong support is always at $435 near the short term VWAP and there is also a recent double bottom. In case of another upmove strong resistance is at $485.

image

With my metatrader 4 price regression channels i’ve a similar picture with support at $424-435 and resistance at $463-475 price zones. Yellow line is the same average i use on sierrachart, ALMA moving average.

BTCUSDDaily

Weekly Range Update

XBT/USD weekly range.forecast $430-$450 | daily moving average is slightly bearish and strong support is at $430 near the short term VWAP. XBTUSD has broken to the upside from the previous congestion range ($400-$430) although now it is a bit weak and could probably test the VWAP at $430. For today support is at $445.

chart

Short Term Update: VWAP test

image
A major drop pulled XBTUSD right above my 2 months VWAP thus for now we are not going to see a stronger up move near $500. However the market might rebounce from here as happened many times in the past after a strong correction the VWAP provided support. I think that could be smart to buy at or slightly below the VWAP between $400 and $425.

In the attached chart i replaced the RSI with a Stochastic oscillator with standard settings, moreover i added the R-Squared indicator that often is useful to understand what is going on.

R-Squared

What the hell is RSquared?:) Well R-squared is a measure of association and it measures the proportion of explained variation between the linear regression and the underlying data it is tracking. For a trader this means that the r-squared calculation identifies how much closely the linear regression indicator matches the price movement. The higher the r-squared value the greater the correlation with the trending component of price.

The length of lookback parameter (14 periods in the above chart) chosen plays a role in determining the numeric level at which r-squared assumes a positive correlation with the underlying linear regression and price movement at the statistical 95% confidence level; the shorter the r-squared length, the higher the r-squared level needed. In our case a 14 period reaches a positive correlation at the 0.27 level, while a 50-period only needs to exceed a 0.08 level.

R-squared moves on a scale from zero to one. A rising r-squared indicates strength of association with a price that is trending, while declining r-squared readings suggest a weak or weakening correlation between linear regression and price, in this case the price is simply moving sideways without the presence of a trend.

In the above chart you can see that when r-squared is stalling above 0.80 a possible top is near but this doesn’t mean the price is going to crash because another option is the price moving sideways right below a top.

A stochastic oscillator is useful as a timing tool to enter short or long when the r-squared is saturating above 0.80.

Another view of stochastic and r-squared with an intraday chart

BTCUSDH4
This is an H4 chart of XBTUSD, you can clearly see the cycles of the r-squared moving above 0.27 (0.27 because i’m using 14 periods for the indicator) and 0.80. It is clearly visibile the price going sideways when the r-squared is stalling above 0.80; now the r-squared is again approaching 0.80 signalling that the strong downspike is probably near the end togheter with the stochastic oscillator near oversold territory.
The yellow line is the ALMA moving average, other lines are a way to do a regression of the price and deviation lines to build a price channel.

Weekly Range Update

XBT/USD weekly range.forecast $440-$480 | daily moving average is bullish and strong support is at $420. $480 is in sight and XBTUSD has broken to the upside from the previous congestion range ($400-$430). For the very short term support is at $450.

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