Long Term Update: bearish or not bearish?

Here is a daily bar chart that sometimes I use to keep track of a bull or bear market trend.

An interesting thing to note about this chart is that XBT/USD is below a dropping 200 days moving average (red line), a typical bear market setup. XBT/USD is also below its 50 days moving average (black line); both averages are dropping confirming the bear market.

Reactions within a bear market typically take a security above its 50 days moving average and up near its 200 days moving average. The 2014 June top is a good example of a reaction ending at the 200 days moving average and above the 50 days average. The position of the 200 days moving average should be considered as the upper limit of a rise within an ongoing bear market.

The first sign that the bear market is over would be a rise of XBT/USD above its 200 day moving average followed by a rally back to or slightly below the 200 day moving average which reaches a sideway or improving 50 days moving average; this configuration for example happened in april-may 2012 at around $5 for then climbing up to $15 in August.
Right now the market appears to be a bit away from this kind of bull market signal but not too much considering that XBT/USD can quickly rise up to or above 550 dollars (200 days average) even in a single day. This quick rise could reverse the 50 days average to the upside and in a couple of weeks reverse also the 200 days average confirming the birth of a new bull trend.

To conclude I think there is a lot of short term bearish sentiment in the market but the bullish news constantly hitting the headlines are increasing the odds of a sudden rise back to the resistances (both averages ranging from 525 to 550 dollars). Still, such a reaction might not be fatal to the bear market trend, so in any case we just have to watch the market’s behavior relative to these moving averages to draw a final conclusion about the bitcoin’s fate. I encourage everyone to add these 2 moving averages to their daily chart.

Many of you are probably asking to themselves if i suddenly turned bearish about this market, yes and no because i consider the 50 and 200 days moving average approach not a perfect one, it might be good for the stock market but for bitcoin that is a new market it might be different, Why? probably because of its insane volatility level that can quickly change the overall picture.

Personally as long as XBT/USD stays above the top of its previous cycle (April 2013 top at $266) and with a rising network difficulty  I’ll never be fully bearish as i’ve already explained many times in the past.

NOTE: The attached below chart is the composite of four main exchanges: btce,bitfinex,btc-china and bitstamp.


21 thoughts on “Long Term Update: bearish or not bearish?

      1. Enky

        it is interesting because there are aspects of the theory like the fractals but overall it is a too complex approach to the market and if it is too complex it is open to the OVERFITTING issue, if u overfit the non linear behaviour of the market you are very prone to have forecast errors. At the end it’s a fascinating theory but it doesn’t work.

      2. h3speros

        You could say that instinct or intuition plays bigger part in EW than in example simple MA-system and yes that is a bad thing. But maybe you could use EW as some kind of guide, idk.

  1. Arthur

    Thanks Enky I noticed some changes in the figures also, for example the ask walls have moved to 490 and 515, and overall ~2,500 asks have been lifted since yesterday. Amongst other figures (price still sticking in the high 470s since yesterday) I’m turning mildly bullish for the next few days. I’ve decided to wait with my next trade.

    1. Arthur

      So far, today same story. Even more asks have been taken away from the order book on Bitstamp, and the price floating mostly in the high 470s. And the 15m RSI, when I look at the range of just a few dollars between 30 and 70 and back, it’s not going anywhere like this. For example, a dump of some 600 coins just now brought us to the 473, but all in all we don’t see impressive moves either way. What do we expect guys, for the upcoming days?

      1. Enky

        It’s in a trading range from $469 to $480 at btc china and from $463 to $487 at bistamp/bitfinex, trading range defined by short term vwap deviation lines.

      2. Arthur

        Yeah, thanks Enky… I’m posting here since I can’t join the chatroom where I’m now.

        Anyway, when I look at the total picture since we hit the 680 in early June, it looks to me we are building up a rather quiet and flat period after a little more tumultous (and bearish) period since then. Previous patterns like these resulted in a break of this flat period in an upward movement later on. I’m hoping I’m right, also because I said a few times before that I’m expecting we are in a trading range 440-680 since we broke the bearish triangle in May. Which I said after it turned out we didn’t see a bull run in July, which I expected (but that turned out to be very wrong, obviously, lol!).

      3. james

        Hi Arthur
        I think this fast drop from 680 made more damage to the bitcoin image then the one from 1200. Ppl just understand that currently bitcoin is being used as pump n dump “buisness” and not worth of taking the risk. I dont think we will see another peak soon. I think it is more likely we continue going down.

  2. croll83

    Enky, I can’t access to the chat these days… I was wondering if there is a way to figure out the price of margin calls on Bitfinex (ex. with the analysis of the order book), because I’m pretty sure they will drive this drop and with this info we can find the bottom…

  3. well we breached the 440 mark. Bitstamp @ 439,72 and bitfinix 442.41.
    Lets hope it will bounce back. I sold some at 471 and bought some at 461 and 447.

    1. Damm whats is going on :S we dropped to 392 on stamp and 390 on fenix. This is absolute madness. Some people are really destroying the value of BTC while there is not reason for it. There is mostly positive news and the value is only dropping.

      1. HG

        I think a lot of violent downtrend is due to margin calls around the 420 area. This was the breakout zone in May when a lot of longs were opened. Look here: http://www.bfxdata.com/combined/btc.php The second chart will shows you active longs on Bitfinex, I can only guess there is a similar view on the other exchanges.

      2. Thanks.
        I really hate this market right now 😛 its no fun only going down for month after month. This no good sighn for the BTC value for this year.

  4. for me is eliot is a way of reading patterns. its very good for backwards analyses. also sophisticated is the x-charts system from devin sage.

    continuing bad news all around, which could define for now a new trading range between 320 and 440. I see a bloody christmas coming for the bitcoin, as long the turnover is not growing faster.

    1. Enky

      at this point 330 could be a nice target but there is no limit to the madness, instead of buying on a level i’d rather wait for a reverse in the long term moving average i use, that is bearish at the moment.

      1. Mike

        Looks like 339 was the last bottom on Bitstamp… If this doesn’t shake out the majority of new traders I don’t know what. I didn’t think we’d see this bottom again but that proves that fact is always stranger than fiction….

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