Technical Analysis Archives

Uncertainty clouds Bitcoin prices, shorting is not a long term option anymore

Posted on March 1, 2017 | by [email protected]

Bitcoin has enjoyed a super bullish run in February owing to numerous factors that has filled the market with heavy speculation. The currency was able to break the all-time high and is now cruising over $1200 levels. As the currency is exploring untraded regions, a lot of uncertainty has clouded the market judgement over the price movements from here on. While fundamentally the market is trending and has got support levels, let’s look into how the prices would behave technically in the near future and how this market can be traded:

Having the market view:

While trading any market, it becomes essentially very important to have a view about the market trend or atleast a good understanding of it. As indicated by the graph, the Bitcoin market has been heavily trending in the bullish direction with favorable fundamentals. With the speculation surrounding the US Securities and Exchange Commission’s decision over Winklevoss ETF, the market has seen a short bullish outburst. The trend lines show that the market has been bullish in a channel indicating low volatility and manifestation of good volumes in the market anticipating a heavy move.

Marking the right indicators:

After ascertaining the channel in which Bitcoin is confined to, it is quintessential to know the strength of the support level that is supporting the move. The base of the move would be the support level generally, but what would be really fruitful to find is the strength of this support level. For the current trending Bitcoin market, the move originated from $750 level after the drastic drop in prices due to Chinese interference. The price levels are 61% retracement levels of Fibonacci retracement level for the upward move from $560. Hence the move is backed by good support due to Fibonacci retracement levels and hence has a strong support.

Possible entry positions and positions to avoid:

Under the extremely bullish conditions, possible market entry points include the lower support line of the trend channel or the middle Bollinger band. If for some fundamental reason, the market comes all the way down to lower Bollinger band, with the Bollinger bands being steady, then taking a position at this point will turn out to be profitable. Under such extremely bullish conditions, it is wise not to take a short position expecting long term benefits. Short term short positions can be taken to scalp rewards from the market owing to the volatility but not with a long term bearish view.

Why Bitcoin Price drop shouldn’t be a surprise?

Posted on January 9, 2017 | by [email protected]

2017 started with a dream Bitcoin Bull Run with the cryptocurrency prices surging towards the all-time high. Before bitcoin enthusiasts could cherish the currency peak, there was a sharp drop in the price taking the currency back to $900 levels. Most people were shocked and disheartened about the abrupt shift in market dynamics. Market players started scurrying for reasons and comforted themselves with the circulating rumors involving China’s Policies. While it is true that China has always been a major influencer on Bitcoin prices, it might not be the driving factor here. Let’s look into why Bitcoin prices were bound to fall at peak levels and what would be the trajectory from here:

It’s all technical:

Bitcoin market has always followed the standard rule of currency markets: market trades all the regions adequately before moving to higher levels. It is very important to keep this in mind as market has always come back to trade low volume regions before resuming the Bull Run. This was evident when market went from $700 to $800 level and crashed back to compensate the lack of volumes.

Similar to that swing, market went from $900 to above $1000 with scanty volumes. Hence the crash was expected and the market came back to trade the low volume regions.

The peaks are always sloppy:

The prices have been bullish for most part of last year and the market has been trending. The only way this could have been halted was the effects of strong, long term and negative fundamentals. This happened for a brief period in 2016 when China announced capital controls on Bitcoin which lowered the prices. Later the sentiment settled and the market became trending in bullish direction.

When the market approached the peak for the first time in three years, the apprehension surrounding the speculation became very intense. With low number of buy orders at the top, traders and programmed algorithms can be set into a sell mode with little panic. With unstable market dynamics, the rumor acted as a catalyst for the quick crash.

What’s next?

Following the pattern, the market has consolidated at 78% Fibonacci Retracement level. Algorithms are coded to have strict adherence to these levels. Infact quick acting algorithms would be reason for the crash of the market which ignited a sell off. These $900 levels would be a better entry position to set oneself up for long-term trades. If the all-time high breaks, the market is bound to go very high with good volumes and strong support.

Bitcoin Price Analysis: Could rising interest rates threaten the uptrend?

Posted on October 3, 2016 | by [email protected]

After riding high on fundamentals during September, Bitcoin has had a positive start for October. The price remained fairly over $600 in September with the fag end of the month testing heavy support around $595. After the rebound from $595, the price has now rallied to over $610 over the weekend. While the setup looks bullish, let’s look into the price analysis for October:

Fundamental Key Points:

The adoption of the cryptocurrency and its underlying technology has always been the fundamental positive for the Bitcoin ecosystem. Here are few highlights of the past month fundamentals that might continue to have a prolonged effect on the prices:

Blockchain Firms Axoni and R3CEV’s Data Management Trial for 6 Major Financial Institutions
Winklevoss Bros’ introduction of daily Bitcoin auctions and Gemini’s expansion to Hong Kong and Singapore
US Congress calling for a legislation to regulate Bitcoin and Blockchain Technology
Deloitte coming into the Bitcoin scene with the launch of a Bitcoin ATM
UK to amend laws to accommodate Digital Currency Exchanges

Any continued activity pertaining to the above key points is sure to have an impact on the prices. Adding to the above, from a macro perspective, rise in interest rates might boost the prices of Bitcoin. Nevertheless it would also depend on the timing of the news release and the trading prices at that point.

Technical Analysis:

Long Term Trades:

The Long Term prices have been in an uptrend from the start of this year, with the 200 SMA (in Yellow) getting breached only once during this duration. The $595 level has been a good buy zone and can slowly become the change point for a long term trend. With previous swing lows at $560 as a stop, one can enter into a long term trade at $595. The previous swing high at $778.71 can be a target.

If the market is unable to breach the 100 SMA on the upside at $620, the market can turn bearish. It can crash back all the way to the 200 SMA breaking the support at $560. For this to happen there has to be a strong fundamental factor driving the prices down.

Short Term Trades:

On a daily chart, the Bollinger bands are narrowed out and expanding indicating an impending break out. Given the technical setup, a break out on the bullish side looks more feasible. There is a zone of heavy support around $600, with the middle Bolligner band, 9,13 and 34 SMAs supporting the prices. Good short term trades would be to take positions targeting the 100 SMA.

To get apt entry positions, let’s look into lower time frame:

On shorter time frame (4 Hrs), the setup is trending with parallel Bollinger bands indicating the trend. 34 SMA has been the line of constant support after the test of the support zone. Entering into short term trades at 34 SMA targeting higher Bollinger band can turn out to be profitable. With the setup being bullish, short term trades from the bearish side might be a risky affair.

While taking long term positions, factoring in the news pertaining to US movement for legislation and Fed announcements would be advisable.