BTC Update Wednesday 31st Jul

Clearly nobody read my last update!  The market did not dwell the marching pause I was anticipating below $104 and instead bolted through resistance to all but tag next resistance at $112 during Asian trading.

Here's how it looked on the chart:

I can only hope that readers bought on one of the 2 retests of $92 as support - that we advised back down the road - as if they did, they are currently sitting on a 20% gain for less than a weeks exposure.  This is a very tidy profit which serves to emphasize the wisdom of jumping onto a trend reversal the moment it has been confirmed by a rejection of old resistance as support.

Anyway, whether or not you followed our advice, you will be more interested in what happens next.

The first observation we would make is that the ongoing rejection of $112 at the first ask is entirely to be expected.  There will have been a meaningful weight of sell orders up in this area that today's surge will have triggered.  Clearly there were sufficient to soak up the prevailing buying power as the rally has - for the time being - stalled and given a few dollars back.

While it remains entirely possible that continued exuberance once Europe and then North America come on line will push the market up and through $112, the zone between there and $120 gets noisy and it is - to our mind - unlikely that further gains into this zone will be sustained at the first ask.

For this reason and as we said yesterday, we do not favor chasing a rally as more often than not your emotions will lead you into a position at or near the top of a move, only to endure the stress of having your trade quickly 'submerge' beneath the subsequent pull-back to well below your entry.

As we said at the top, hopefully you are already exposed and sitting on a nice profit.  Far better now to wait for a measured pullback and either initiate or add-on to a position from a test of support.  And just now this is a long way South of the market at $105, but as time passes the rising support line you see in green will separate and give us a rising edge to work off of.

Finally, if you need  immediately to liquidate bitcoin to fiat - in spite of what you have seen today - then you should do so 'at market' or anywhere just below $112.  We advise this as while this level may well 'give' at the next time of asking it is equally probable that it will hold for the time being, especially as the market has already moved a long way in the last 12 hours.

Posted by Rob @ BitScan