Long Term Update

BTCUSD Monthly Chart KAMA Average 5 periods and deviation lines.

Since the last update on February 13 there are not many new developments. The monthly KAMA average is flat, which allows us to calculate fairly reliable levels of support and resistance. As you can see nothing interesting happened with the BTCUSD cross that remains inside the supports and resistance levels (yellow lines).

I have added a new indicator that calculates supports and resistances using as a starting point the close of the previous month (with the idea to forecast next month support/resistance levels), in this case the close of February at about $ 10300. I have used the last 50 months, just over 4 years from the bear market’s lowest point in 2015, to calculate volatility.

The drop we have seen in recent days has reached an intermediate level, -1.5 standard deviations, so I can say that there has not been a level of extreme volatility but not even normal.

My opinion is that the bitcoin will continue to remain for most of the year within the levels calculated with the KAMA (yellow) and therefore remains a good opportunity to buy the price area from 4000 to 5500 dollars, while it is to be evaluated a reduction of any bullish position should the BTCUSD go above 25 thousand dollars.

I also give you some short term indications for the next days, the first resistance is $9500, you might see a Top not exceeding $9500 before the BTCUSD resumes its descent. A break above $10000 would mean that at least in the short term the bearish trend is over.

 

ITA Version here

Long Term Update: 2018 Outlook with entropic methods

Every beginning of a new year i post an outlook using entropic methods explained in the technical section of this blog. Here you can find the 2015, 2016 and 2017 forecast update, where you can find more information about this approach.

Updated values for bitcoin (in brackets values of last year) using daily data since August 2010 (average of 4 exchanges when possible).

 BTC/USD
Growth Factor G 1.0028 (1.0007)
Shannon Probability P 0.5384 (0.519)
Root mean square RMS (see this as volatility) 0.059 (0.045 )

Bitcoin’s entropic values versus the Usd strongly improved in 2017 but volatility increased a bit, despite this the Growth Factor (G) increased up to 1.0028% (remember that volatility is detrimental to the Growth Factor) compounded daily or 280% yearly up from 30% of 1y ago. Also the optimal fraction of your capital to invest in bitcoin improved in 2017 with a 7.7% instead of 6.4% of 1y ago.

 2018 Price forecast  Full volatility  Half volatility
Forecast using only G* ~38700$ ~38700$
Upper bound adding volatility ~121000$ ~68000$
Lower bound subtracting volatility ~12300$ ~21800$

*38700 is obtained with today price (around 13800$) times (1.0028^365)=~2.77
13800*2.77=38740, just change 365 with the number of days you prefer for a different forecast.

It’s interesting to notice that with reduced volatility the support level is above the actual quote of XBTUSD (13800$ at the moment i’m writing) because the growth factor (G) is very high and is skewing everything to the upside. If volatility stays low the uptrend should push bitcoin above 22k USD during the year without too much effort, it’s a scenario i prefer instead of wild price swings.

What went wrong in 2017?

A year ago, I forecasted a top of $2900, reached in July 2017 with an intermediate Top well ahead of the end of the year. I tried to double the volatility factor (rms) to see the next level after a reader asked me about the possibility that bitcoin was in a bubble above 2900$. The next level was around 6000$, again this new level has been broken at the end of October.
The last 2 months have been crazy and the explanation is a huge change in shift in this market happened in March 2017 (with altcoins literally exploding) that basically erased the reliability of the January 2017 forecast. I think that this year forecast should be more accurate compared to last year.

Conclusions

For this year i think that i’ll consider the support/resistance levels obtained with a full volatility value with the result to have for the whole 2018 a good probability to stay inside the 12300$-121000$ price zone.
At the same time i think that at the end of a strong buying climax period, if any, it will be wise to reduce your bitcoin investment if the price goes above 60k-70k USD.

I’m at your disposal for any questions; see you at the next update and Happy New Year!

Weekly Range Update

XBTUSD dailychart
XBTUSD dailychart

XBT/USD weekly price range is 6500$-7600$ | The resistance zone ranges from $7600 to $8700 and is defined by the two deviation lines furthest from the VWAP.

I think it’s time for a correction to the first support located at $6500, the buying area for this week is from $6500 down to $5400. I think it is very difficult to reach $5400, a minimum at $6500 is much more likely and would not compromise the possibility to see a new ATH this week.

As explained many times in the past, it is important to look at where bottoms and tops are located to understand in which direction is headed our cross XBTUSD , given the great strength of the last two weeks it would be more consistent to have a minimum at $6500 rather then $5400.

To conclude the first level to observe is $6500, the next $5400 and without unexpected negative news it’s very unlikely this week to test the VWAP at $4350.

In the event of an unexpected catastrophic news, the support area on the weekly chart is updated to 2250-2875 USD.

Since many people asked me more details about these extreme price levels, I want to spend few words on how the support area is calculated in case of a strong drop due to unexpected negative news. I use the last 52 weeks to calculate bitcoin volatility and starting from the closing price of the previous week I project two support values using 6 and 7.5 times the initial value of the calculated volatility. In the past I have explained the concept of the “six sigma”, which concerns the construction quality in industrial processes and I have applied it in this field to calculate support levels and resistance levels which are practically inviolable and which obviously only apply for the current week.
A value of six times is used, with an extra tolerance of 1.5, to arrive at a maximum deviation that uses 7.5 times the initial volatility.

ITA Version here.

Weekly Range Update

XBTUSD dailychart
XBTUSD dailychart

XBT/USD weekly price range 5350$-6600$ | The most obvious thing for this week is that the XBTUSD cross will spend most of the time in a sideway movement between 5350$ and 6000$ considering that it comes from a rise with a strength never seen before since I follow bitcoin.

The buying area is the same reported in the previous update, ranging from 4700$ to 5350$, the resistance zone from 6000$ to 6600$.

The RSI oscillator and its average are both overbought as logical after the sharp rise seen in recent days. I believe that this will be an interim week with the price remaining between 5300 and 6000 USD, so I think a strong bearish movement is unlikely to push bitcoin down to the 2 months VWAP , now at 4100$.

In the event of an unexpected catastrophic news, the support area on the weekly chart rises to 2400-3100 USD.

ITA Version here.

Weekly Range Update: Over 4300$

XBTUSD dailychart
XBTUSD dailychart

XBT/USD weekly price range at 4300$-4800$ | There is an unusual situation this week, the 2-month VWAP average is flat since the bottom of 15 September, therefore neutral trend for the short term. However, the market has surpassed the resistance value I mentioned last week, at $4300, this is a positive note.

To bring the short-term trend back to the upside we need to stay above $4300 at least for the whole week. The resistances shown in the graph range from 4800 to 5250 dollars.

In the previous update I had suggested to my readers a short term long operation from about 3600$, who followed this “trading idea” will surely have had a decent profit, I invite you all to keep this operation open as long as the XBTUSD cross will remain above $4300, below this level I suggest to close the position.

The RSI, as I said last week, has already given a sign of purchase that is now confirmed by its average which is on the rise, however we have not yet entered the overbought area leaving margin for a possible rise up to $4800.

In the event of an unexpected catastrophic news, the support area on the weekly chart rises to 2100-2600 USD.

ITA version here.

Weekly Range Update: BCC? We don’t care.

XBTUSD dailychart
XBTUSD dailychart

XBT / USD weekly price range at 2200$-3140$ | For this week the range is similar to the previous one because the 2 months VWAP average is basically flat. Last week I was expecting a breakout outside the congestion range with a new maximum or a test down to the VWAP  at 2440$, this latter possibility occurred.
As long as the price continues to remain above the VWAP at 2440$, the situation remains positive.

As for the other indicators I use in this template, you can see that the ALMA mov.average is still up and the RSI has almost tested the overbought zone at 70.

As for the tomorrow’s event I see it as the mere birth of a new altcoin, I do not expect a big impact on the XBTUSD cross price as it is not an unexpected news and has already been discounted by the market , it might have the effect to increase volatility but I don’t think that tomorrow will begin a bearish move due to this event.

In case of extreme fall, the support area is 1300$-1650$.

Follow me also on Twitter where I started to publish charts on both bitcoin and some of the most important altcoins using the TradingView.com platform
ITA version here

Weekly Range Update: new top ahead?

XBTUSD dailychart
XBTUSD dailychart

XBT / USD weekly price range estimated at 2400$-3120$ | For this week the range in case of low volatility could be 2600$-2880$, in case of volatility above normal we could see a range of 2400$-3120$ thus implying a new all time high above 2900$.

As you can see in the chart, the price remain bounded between two deviation lines, the first and second; this week the XBTUSD cross should break one of the two levels by retesting the VWAP or making a new all time high between the third and fourth price deviation lines (3120$-3360$).
As i said in some of my earlier updates I still expect a maximum above 2900$ for this year, I still believe that it will happen.

As for the other indicators I use in this template, you can see that the ALMA average is back to bullish and the RSI has quickly tested the oversold area below the threshold of 30 during the 1800$ bottom and now it quickly returned above 50.

In case of extreme fall, the support area is  1250$-1600$.

Follow me also on Twitter where I started to publish graphics on both bitcoin and some of the most important altcoins using the TradingView.com platform
ITA Version here.

Weekly Range Update: Kama Levels

Kama Levels BTCUSD Composite Index
Kama Levels BTCUSD Composite Index

For this week I will use my KAMA indicator with deviation levels available on the TradingView platform for free, the weekly price range in case of low volatility could be 2400$-2650$, in case of normal volatility the expected range is 2300$-2760$.

In the attached chart, the XBTUSD composite index is used and it has been derived using the price data of seven bitcoin exchanges. The formula to use is as follows:

(Poloniex: btcusdt + btce: btcusd + bitfinex: btcusd + bitstamp: btcusd + coinbase: btcusd + kraken: xbtusd + ITbit: btcusd) / 7

This formula on tradingview.com generates a composite index of the XBTUSD cross making the average of 7 exchanges and adding all the volumes togheter, the seven exchanges used are:

  1. Poloniex
  2. BTCE
  3. BitFinex
  4. BitStamp
  5. Coinbase
  6. Kraken
  7. ITbit

Doing this is also useful to see the total volume activity that will give you better results if you are using volume based indicators.

This week, volatility dropped significantly and with the imminent closure of the symmetrical triangle, a pattern that, as I said in the previous update, expects a continuation of the underlying trend.
Next update will include VWAP and deviation levels, but you can still consider the deviation levels calculated by the KAMA average as enough reliable.

In case of a catastrophic event the support area is 1180$-1500$.

Follow me also on Twitter where I started tweeting charts about bitcoin and some altcoins too using the TradingView.com platform

ITA Version here

Weekly Range Update

XBTUSD dailychart
XBTUSD dailychart

XBT / USD weekly price range is 2400$-2880$ | The XBTUSD cross resists over 2400$ support but as I said last week there is always a risk that it breaks down towards the 2 months VWAP roughly at $1950.

With the ALMA daily moving average pushing bitcoin down and its effort to stay above 2400$ there is some sort of compression also visible in the chart as a symmetric triangle (descending tops and ascending bottoms), as I have said several times in the past  this pattern usually forms during a trend as a continuation pattern thus it should end with an upside breakout.

To conclude, the average RSI oscillator is in neutral zone near 50 and the RSI itself has stopped falling without ever entering the oversold area below 30.

In case of a catastrophic event the support area is 1150$-1450$.

Follow me also on Twitter where I started tweeting charts about bitcoin and some altcoins too using the TradingView.com platform
ITA Version Here

Weekly Range Update: flirting with resistance

bitstampUSD 1 Day #1 2017-06-12 09_28_13.020
XBTUSD daily chart

XBT / USD weekly price range is 2600$-3000$ | Our beloved cross pair XBTUSD slowed its rise last week with a contraction of volatility without being able to stay consistently above 3k USD.
However, we must not forget that bitcoin remains in a very strong position since weeks being above the first positive deviation of VWAP and for more than ten days above the second deviation.
For this reason, I recently added a fourth line of deviation above VWAP that I normally don’t use, this 4th line defines the upper bound of resistance zone ranging from 3000 to 3400 dollars.

I think that XBTUSD cross could reach 3400 dollars this week or the next one considering that all the cryptocurrencies sector is going up massively though bitcoin is the one that is rising at the least speed. I have no sure explanation for this but I could hypothesize that it is because a decent amount of liquidity is flowing into altcoins draining resources from bitcoin.

The average RSI oscillator has returned over the overcrowded area and it is now obvious that in this extreme power situation this oscillator moves from the level defining the overcompatible which is 70 to full saturation around 95-100.

In case of extreme fall, the support area is 1050-1350 USD.

ITA version here.

Technical Update: KAMA, an underrated indicator

Kama moving average is a very interesting filtering technique developed by P.Kaufman.
This moving average has been designed to account for market noise or volatility, KAMA will closely follow prices when swings are small and the noise is low, instead when the price swings widen KAMA will adjust trying to follow prices from a greater distance. This trend-following indicator can be used to identify the overall trend, time turning points and filter price movements when the market is flat avoiding annoying whipsaw false signals trades.

At the moment i’m working on a modified version of this indicator with the help of the tradingview online platform, i added deviation lines from the KAMA average and settings have been optimized to better track XBTUSD price movements on daily and weekly chart.

Here’s an example of this indicator applied to a weekly chart of XBTUSD with some comments.
xbtusd_w

It’s evident that when the market is flat the KAMA average is relatively stable without giving false signals, when this happens you can try to trade deviation lines to catch bottoms or tops.

About this week the secondary positive deviation line is around 3200$, should you go short at that level? Well is at your own risk to trade against the main tendency that now is bullish, instead you might follow the trend buying at the midline or below it, i’m enough sure that today sell-off is healthy and the price was just moving back to the midline point (KAMA average) from the first positive deviation line.

Beware that because of very large price variation during the same bar the KAMA and its deviation lines can change a bit. The indicator is available for free at tradingview.com, just look for “KAMA – Enky v1.0”.

Your feedback is highly appreciated and will help me improving this trading tool.

Weekly Price Range Update

eng
XBTUSD daily chart – VWAP + deviation levels

XBT / USD weekly price range is 1150$-1335$ | The market is still in a strong position above the VWAP and is near the resistance level of the previous week (1235$), if a break materializes above the first resistance level at 1245$ there is room for an attack to the all-time high around 1350 $; as support to my hypothesis there is the fact that the last two bottoms happened at 750$ and 900$, two higher lows reflecting the fact that the underlying trend is still firmly upward and it is causing higher highs and lows. With this logic the next maximum should be above 1300$-1350$.

The ALMA average is bullish and the RSI has entered overbought zone. From now on there is a tangible risk that a maximum on the daily chart is forming especially if there is a strong increase of volatility.

In cases of extreme drop the support area is now 700-875 USD.

ITA version here