Monday, 3 March 2014

BTC Update Tuesday 4 March


Well, that was a nice little pop[, right?!  You will recall that we advised a BUY on a strong close of the candle that pierced descending resistance.  Let's review what happened next on a chart...

So, focusing on the green circle, you can see that we got the candle close we were looking for, signalling the BUY trade we advised.  What happens next kinda speaks for itself, with the market popping up over 20% to retest the resistance we had identified at $710 (BitStamp), within the next 12 hours.

As suspected, the selling pressure at this confluence of key resistance has been sufficiently strong to snuff out the rally for the time being, and it wouldn't surprise us to see a consolidation back to the $640-620 area before sufficient new buyers jump back in to reverse the order flow back to the North.

Should this occur the market is likely to encounter far less resistance from $710 at the second time of asking and if we get through at the second ask, the top of the previous trend channel, currently at around $760, is a realistic target.

Having said this, its very early days for this nascent short term trend reversal and it is entirely possible that the market will trade back lower than $640 (and perhaps as low as $550, again) before sufficient new buyers are encouraged back in.

Whatever the immediate future holds, what we have witnessed is a pretty powerful counter-trend spike which, if nothing else, signals a renewed willingness from some to buy back into the market.

So, how does one play it from here? Well, active traders who took our advice 24 hours back will already be flat again, having taken profit at the resistance we identified.  Personally, we'd want to see a nice powerful reversal at $640 to hop back into the market long, this side of a rally through $710.

But that's just us.  Having taken the easy money its sensible to trade cautiously until the market sends us further confirmation that its recent reversal is over.

In any case, we are watching this market very closely again and we shall keep you informed.


BTC Update Monday 3 March


It's been a while hasn't it.  But then it's been a while since the bitcoin market has been moving in a way that I felt was susceptible to rational analysis, which is why I have stayed off the wire.

Anyway, today - in fact, right now - there are reasons for cautious optimism even if the fundamental driver for this optimism is likely to be the (very) worrying events in Ukraine and the market's expectation that the deteriorating situation - and the capital controls that have accompanied it - are likely to be bullish for bitcoin.

Nevertheless, and putting broader concerns to one side, let's review a chart which will hopefully show you what I mean.

The first thing you will note is that the short term downtrend steepened throughout February within an ever broadening channel, which I have attempted to bound with the diagonal lines.

You will also note that with the exception of the day Mt Gox's insolvency was announced, the market has observed support (on BitStamp) of around $535.

Finally, I want to draw your attention to the most recent bar which for the first time in over a month, is trying to break out to the upside of the trend channel.

Now, while this bar is yet to close, if we are still trading at or North of the upper limit of the trend channel resistance line (shown in red) when it does, a surge to $620 is very likely and if we can trade through this - perhaps having leant briefly back against it as support - the way is clear for a rally to $710, which is currently co-incident with longer term sloping resistance.

It bares saying that should the current bar get reversed - and this is a distinct possibility - the market may well view it as yet another fake-out and pile back in to the short size.  In this scenario the resulting sell-off is likely to pierce $535 conclusively and if this goes, the market will look further South still towards the recent climactic low.

So, what to do?  Well, this is one of the few scenarios in which I would be prepared to buy strength.  By this I mean that if the current bar closes nicely above channel resistance - and at or near the upper extent of the bar's range - I would to buy the close with an expectation of further upside gains.

Nothing is a certainty in this game but when the technicals and fundamentals line up like this, I always think that it's worth a punt.

Rob @ BitScan

Tuesday, 11 February 2014

BTC Update Tuesday 11 February

G'day Folks,

Well, it's been an interesting 24 hours, right?!  Who would have thought that Mt Gox would attempt to throw the entire bitcoin protocol under the bus to save their skins...

As it turned out, indeed as it always turns out, the bitcoin market absorbed this news and then bounced right back - pretty much right from where we said it might.

Let's review the situation on a chart:

To recap, in our last post we said a retest of support at $620 (BitStamp) was looking likely but that given the co-incidence of technical support between here and $550, there would be buyers.  We actually went further than that and said we would be buyers at $620 (Point A), and we were.

In the event, the reaction to Mt Gox's announcement was powerful enough to carry the market as low as $520, but as we predicted the buyers were here in sufficient force to reverse the order flow and 24 hours later the market is clawing its way back above resistance at $710.

This is significant in that having failed to break out of the downside of the channel, the market will be now be targeting the other (up) side.  This isn't to say that it will succeed, just that in our experience its the way crowd psychology tends to play where the markets are concerned.

In this case the far side of this channel is co-incident with significant horizontal resistance at $800 (BitStamp).

And where this is concerned, the first thing we need to see is the close of a 4 hour bar nicely above the current resistance zone of $710.

It bares saying that if we do make it up as high as $800 over the next 72 hours or so, the market will have put in a powerful interim low and this could be what we have been waiting for as the motive force to power the next up leg.  Clearly there is much yet to do but it is, at the time of writing, a possibility worth filing away.

In the meantime, we hope that you mustered the stones to follow us back in to the market last night and if you didn't it isn't too late but you need to be clear that the bargain price may have gone; you have sacrificed some profit and a loss might cost you more.  On the other hand, there are never any guarantees and waiting has allowed you to witness the power of this honey badger once again.  In our view this is still a decent point to climb aboard but don't hang about because momentum could build quickly from here.

Over to you...

Rob @ BitScan

Monday, 10 February 2014

BTC Update Monday 10 February

G'day Peeps!

It's hard to escape the conclusion that bitcoin has taken something of a battering over the last few weeks. Ultimately the Shrem arrest, situation in Russia and Mt Gox melt-down proved too much for market confidence and price has taken a bit of a tumble.

From a technical perspective, the rules never change as this young market proves as susceptible to the laws of support and resistance as any I have ever traded.

Let's pull up a chart to review the situation and you'll see what I mean:

In our last post we stated that a concerted move down through $765 (BitStamp) would result in a retest of channel support at around $710.  In the event this is exactly what happened and since then you can see just how significant this price point has become as price pivots around it.

The bad news is that the last attempt to drive back above it and into the channel was successfully countered and at the time of writing, resistance sits above the market like a big black cloud.  Based on what we see here the most probable scenario is further drive South to retest the downside limit of the recent plunge at $620.

However, should this occur the market will be confronted by a powerful co-incidence of horizontal and rising support.

As you can see from this Daily price chart, the $550-620 area of horizontal support is co-incident with a rising support line drawn against the low-side extremes of price since this correction began.  While we cannot be sure that they will hold if and when tested, we can say that active short profits will be booked here in anticipation of the buying counter-attack that the market anticipates will be lying in wait. Often this turns out to be a self-fulfilling prophecy and for that reason, this support area represents an excellent place to pick up bitcoin for those with the stomach for it, as it represents an extreme boundary of the existing condition.

In the meantime, worried bitcoin bulls will be hoping for a rally from where we currently sit and this isn't out of the question.  While $720 has been rejected once in the last 24 hours the market hasn't fallen far as a result and if it does manage to break back and hold above $720 within the next 24, a retest of $765 as resistance is likely and if this gives the market will target the far side of it's old descending channel, currently at around $800.

So, as ever, bitcoin lives through interesting times.  Under attack from all angles its valuation is currently under pressure but looked at another way its resilience is simply amazing.  If you asked any Fortune 500 CEO whether they would accept a 20% drop in their share price in exchange for coincident news of the closure of all their outlets in major country, the loss of a global primary sales channel and the incarceration of one of their highest profile board members, they would bite your hand off.

Bitcoin really is the honey badger and we shall be buying more at $620 if we get the chance.

See you there...

Rob @ BitScan

Wednesday, 5 February 2014

BTC Update Tuesday 5th February

G'day Peeps!

Regular followers of BitScan's market analysis will have noted that we haven't posted for over a week.

There are two reasons for this.  The first is that since the market hasn't moved, there really hasn't been an awful lot to say.  The second is that we have been reconsidering the best prism through which to view the market.  The conclusion we have come to is that with daily volume at BitStamp closing in to meet that of MtGox, coupled with the mounting uncertainty swirling around the viability of MtGox moving forward, convince us that now is the right moment to shift our commentary from one to the other.

So, until further notice all our analysis will focus on the BitStamp market.  We appreciate that some of you have been asking for this for some time.  Hopefully this will serve as proof that we do listen to our clients.

With that said, lets get to work and look at a chart:

What we can clearly see here is that the market continues to consolidate within the boundaries of a gently downward sloping - and well defined - channel.

As we drift sideways in the vicinity up the upper boundary of this channel, there really isn't a lot for any of us to do.  This wouldn't be a good place for active traders to BUY, as downward sloping resistance is close-to and risk of a downside surge against it remain significant.

Active traders could, of course, consider selling here but before doing so, they should bear in mind that the overall context remains UP.

So, what can we say?  Well, on the one hand, should the market surge North to beyond the upper resistance boundary, a momentum move to $845 is highly probable. Should this occur it may well set up a sound BUY opportunity on a rejection of $845 as support.  We'll certainly be watching for that.

On the other hand, should the market fail to breach channel resistance soon, $765 will once again hove into view and if this gets pierced on building momentum, $710 is likely to get tested as support.

And that's about it for the moment.  Except to say that from an investment perspective, consolidation at or near the highs of the most recent Up leg is a strong indicator of continuation - and that's good news for all of us - right?!

Cheerio for now,

Rob @ BitScan

Saturday, 25 January 2014

BTC Update 26 January

G'day People!

I've always believed in owning up to your mistakes and yesterday we made one.  While we suggested that the market might turn at $920 (Gox), we also made it clear that we considered a fall back to $835 far more likely. As a consequence of that bias we cautioned against buying at $920.

Well, 24 hours is a long time in any market, especially bitcoin, and price movement since that last post has proven us wrong.  In the event the market did turn at $920 and had you ignored our advice you'd now be sitting on a profit of around $40 a bitcoin.

Anyway, this latest price movement is significant so let us stop dwelling on the past and have a good look at what has happened and what it could mean moving forward.

Here's the chart:

Homing in on the right hand edge of the chart, we can see that in bursting back to the North the market is re-testing the top of the recent range.  We can also see that having put in a new swing point this move has generated a new rising support line (green upward sloping).  Most significantly, however, is the fact that the move pierced and is currently holding above 2 sloping resistance lines (green downward sloping).  What this all adds up to is a formidable band of support, between $920 and $960, against which new buyers will be entering the market - if they are even tested.  This is a pretty bullish sign and the fact that it exists may well tempt momentum traders back into positions, further feeding the rally.

As regular readers know we had been anticipating a context shift from trend to range.  As of now that view is on notice and based on what we have seen over the last 24 hours, we now feel it more likely that the market will find the momentum to reach up to $1000 at least, which is good news for active traders and investors alike.

Below price, we just need to watch that the market doesn't reverse to below $920 as clearly this would indicate yet another fake-out.

As a final note, anyone still reading this post through blogspot needs to be aware that as of tomorrow, we will be shutting down this service and publishing through the website only. See you all there!

Rob @ BitScan

Friday, 24 January 2014

BTC Update 24-25 January

Hello Peeps!

The eagle eyed among you will have noticed that this chart is little changed from our last post.  You will also recall our suspicion that the market was transitioning from trend to range mode and that the most likely scenario in that case, was a failure to breach its top, at $960 Gox, and a subsequent retracement back into the range.

Let's have a look at the chart:

What we see here is classic range behavior.  When price moves to within the influence zone of a key price point momentum suddenly builds as everyone climbs onto a move that is quickly becoming a racing certainty.  But when that key price point is tagged momentum just as suddenly evaporates and late entrants wonder what the hell happened.  Well, what happened is that all the smart money booked profit because they realized that the easy profits were off the table.

This is why we have seen the market mark time ever since $960 was hit and more recently, momentum build in the other direction.

As it stands price is hovering around the inflection point at $920.  If this gives we will likely see downside momentum build as active traders target the bottom of the range, at $860 or possibly $835 beyond it.

If and when this triggers, the sudden burst of momentum will again be pronounced but when we get there, the wall of support, coupled by active trading money coming back off the table, should once again stop the movement in it's tracks, and after a period of stagnation the cycle will set itself up for a repeat.

This is the nature of ranges.  They are infuriating for momentum traders but for those with the savvy and bravery to trade from their limits, they can be very profitable.

Having said this there's always a possibility that the market will look back to the North from where we currently sit - and if it does this will be bullish - but in our view the probability of this occurring is not sufficiently strong to make it trade worthy.

So, for the moment our intention is to keep an eye on things, sit on our hands and ponder a further BUY trade at the bottom of the range.

Investors - as you were. It's all cool.

Rob @ BitScan