Short Term Update: Holding above support

BTC/USD formed a double bottom at 120$ on the hourly chart, and it is reacting well, as long as it stays above the VWAP at 114$ i’m not worried.

If another quick flash crash will take place i recommend to watch out the 75$-80$ price zone where i think BTC/USD will find support and react strongly; that price zone is around the minus one standard deviation of April volume weighted average price. It is a very improbable occurrence a test to the -2 standard deviation line at 50$, so for the remaining part of April and probably till mid May, BTC/USD will stay away from fifty dollars. chart

Advertisements

Short Term Update: Near resistance

chartLast 2 days BTC/USD has been very bullish avoiding to fall in a congestion, bitcoin is near the first strong resistance i’ve since the 50$ double bottom. A first evidence of the bullish behaviour is the strong volume on ask side of the order book, once ask side will become prevalent in the mtgox orderbook i think that another correction will take place, but not as strong as the first one.

168$ is not only the +2 standard deviation line of April VWAP but also the 50% midpoint of the 266$->54.5$ first correction , i expect some resistance here but for now i’m not going to close my trade.

For who want to play extremely safe, i recommend then to close at 170$ or so.

Congestion?

chart copy3 inside bars in the last 3 days, BTC/USD is close to be in a congestion area, the measuring bar for the congestion is the  bar of last April, 19.

Usually any time prices close on four consecutive bars, within the confines of the range of a “measuring bar”, you have a congestion. The measuring bar broke also the VWAP from below to above it, a sign that i consider a bullish setup.

On the attached chart i plot the +2/-2 standard deviation line but when volatility drops a bit we can consider also the +1/-1 st.dev.line; the +1 std. deviation line is at 139$, close to the recent high of 136.5$, the -1 std.deviation line is at 75$.

I think that if we are going to see a prolonged period of congestion it is not excluded a visit to 75$ if BTC/USD breaks down out of the congestion pattern, time will tell. For now i stay long with my long term trade, stoploss is under the 50$ double bottom support.

Last comment about the recent spike in volatility, well i never seen before an insane volatility like the one see in the bitcoin market, to give you an idea actual volatility is something like 13 times more then the historical volatility of american stocks, just crazy!

Short Term Update: Daily Chart of April

chartDuring the last 24 hours of rebounding prices the net volume turned positive again, sign of a comeback of buyers after a huge 7 days sell-off. Overall volume is at all time high, with more then 500k btc traded at the two bottoms, april 12 at 54.5$ and yesterday at 50$.

Despite an increasing selling pressure, yesterday the market failed to go below 50$, again this is a sign of buyers coming back and sellers going out of ammunitions. Looking VWAP levels, support stands now at 40$ and resistance at 172$, VWAP is at 110$  and it will be an important test to see if this rebounce just started has enough fuel to go above the VWAP. After 6 consecutive days with lower highs today BTC/USD has broken yesterday top at 84.5$ with an intraday high of 88$.

If sellers will take control again and the market fall below 60$ i shall conclude that BTC/USD is headed at least down to 40$, to the minus 2 standard deviation line of april VWAP levels. We are at a critical juncture that might confirm a long term double bottom for bitcoin.

 

 

Short Term Update

chartGood morning, after more then one day i finally managed to download updated data about mtgoxUSD from bitcoinchart , i’ve now a better picture of what is going on. I think that the correction ended in a severe selling climax bar that normally occurs at market bottom with a total volume of 475k btcs that changed hands, remarkably. The bottom occured just below the minus two standard deviation line of the VWAP (volume weighted average price) the excess below it  it’s what  i call  “last motion”; support is now at 68$, vwap is at 130$ and it’s providing some sort of resistance, upper deviation line is at 190$ where probably this reaction will meet strong resistance. It is very important in the next week to move above the vwap over 130$, otherwise i’ve to conclude that the market temporary reversed to the bearish side as long as it stays under the reference average.

I conclude this update spending two words on net volume, that i repeat it’s the difference from volume made on an uptick minus volume made on a downtick, i use it  to judge the momentum or trend in order to make assumptions about its future price movements. Well, i report a net volume of minus 70k btc on the day low, i’ve seen worse days in the last 2 years, for example last August 2012 during the infamous “pirate40” sell off i remember a  net volume of more then -110k bitcoins, another selling climax bar that marked a strong bottom, 7.5$ at that time.

It has been a severe drop from 266$ down to 54$ but i remain confident that the recent bottom will hold. If i’m wrong and the market will persist with its short term bearish behaviour and it will go under 50$ i’ll probably have to close my long term trade from 13$.

Short Term Quick Update

Eighty dollars, my dear followers, is the key support. It has been violated for 20 minutes at MtGox at 2 GMT time, down to 65$, then quickly recovered up to 140$ minutes before the programmed two hours trading alt.  Now MtGox is under a severe DDOS attack and trading activity is intermittent but price is holding above 80$. Problem is if it starts to drift lower 80$ it might get enough momentum to break 65$, other exchanges have traded down to 50$ before rebouncing, for now the situation remains fragile and volatile as well.

As long i don’t see prices under 50$ with a strong negative net volume activity i’m not going to close my long term trade opened last december at 13$, i’m still bullish for long term.

UPDATE: 80$ broken, volume activity is very high, i think it’s a record more then 385,000 bitcoins traded at mtgox last 24h, and 650,000 overall considering mtgox,bitfloor,btc-e and bitstamp. 50$ is my next level, i can’t be more accurate because i’m in trouble with sierrachart plugin for bitcoincharts, i’m without charts at the moment.

Short Term Update: MtGox Lag above 1 hour, interesting:)

chart

In the last couple of hours we have seen an extremely volatile market, with a yo-yo behaviour hard to manage for an amateur speculator is easy to get slammed, in such situations sometimes is good to don’t touch and wait and don’t let emotions take over. Aniway, in the above image the market strongly reacted down near the second standard deviation of the VWAP, at 105$, after a severe and chaotic drop, i tend to consider this drop a market glitch because of the high lag due to a problematic trading engine at MtGox.

On a weekly basis, the trend is still up, trading activity is growing and show an good volume activity. The weekly moving average is unaffected by the recent wild swing, the ALMA moving average for this week is at 130$, close to the bottom. The net volume indicates to us that the correction just happened isn’t catastrophic as it might appear looking the price drop from 265$ to 105$. The VWAP is at 150$ and i think that tomorrow the price will stabilize itself above that level.

As a side note i should say that a lag of 4500 seconds isn’t properly ideal, i hope that MtGox fix this embarassing situation as soon as possible, it’s in their interest. It’s simply unacceptable, ridicolous, that the leading Bitcoin exchange doesn’t stop trading operations during severe drops caused by hardware/software failure. It is blatantly obvious that with such an high lag and uncertainty people go to panic selling, MtGox should implement some sort of trading curb, also known as a circuit breaker, where trading will stop for a period of time in response to substantial drops in value.

Long Term Update: Bitcoin is going out of control:)

I consider parabolic fitting a smoothing algorithm with poor forecasting results in most cases, but apart from theoretical considerations let see in detail if parabolic smoothing and forecasting can help us finding a strong long term resistance for BTC/USD.

Parabolic rise is also called an accelerated growth phase, so after it breaks out from a long basing pattern (for bitcoin the 16 months prior January 2013), it starts a rapid growth phase with a series of ever-steepening, rising trend lines. The acceleration of bitcoin price appears as a parabolic curve on the price chart, and can happen that the final stage of the move will end with a leg that is virtually straight up with a buying climax last bar.

Parabolics almost always collapse, this is what worries me at the moment, sometimes there is a bit of topping followed by a precipitous decline, but other times the straight up move reverses into a straight down move of equal or greater magnitude.

What is doing now bitcoin is a good example of a parabolic rise in an early stage, using last 10 weeks i derived the formula of the current parabolic that bitcoin is following:

y = 1.81 * x2 – 11* x + 35    where x2 is x to the power of 2

As i explained many times i think that normally a swing can last up to 25-30 bars, in this case weeks, extrapolating the above formula i can compute a target (you can do the same just substitute “x” with the number of weeks).

With 25 weeks i’ve a target of 890$, using 20 weeks i’ve a reasonable 540$ target; i think that a long term top beetween 500$ and 1000$ is likely to happen, all depends if bitcoin will reach the wall street crooks or not:)

chart

Jokes apart, if this weekly upswing will last 25 bars then the top is due next August/September 2013.