Tuesday, 8 October 2013

BTC Update Tuesday 8th October

Okay, so everything has kinda stalled as bitcoin has settled back into a $5 range, between $135 and $140.

Here's how it looks on a chart:

Is this a good news or bad?  And what might it mean moving forward?

Well, as a general rule, if price has been trending and then levels off it is generally an indication of continuation. And as the moving averages 'catch-up' trend traders jump aboard or add onto positions as early counter-trend traders (those who attempt to time reversals) lose confidence and/or bang out of losing positions with small losses.  The combination of these two phenomena creates the trend positive order flow that carries the market into the next leg of its trend.

And this could be what we are witnessing.

Having said this, what will be worrying bitcoin bulls right now (and I know this because it is starting to play on my mind...) is that price has leveled off at a point below last month's top and the most recent high, when what we all wanted to see was a gathering of momentum into and, ultimately, through resistance.

And as time goes by more and more bulls will see their confidence in long positions undermined thus.

In situations like these it pays to have some price levels to watch, so let's focus on that.

As is stands - and while we would obviously like price to pick up from right here, a fall and bounce from $130 should be expected and a fall lower to $125 tolerated.  Anything beyond that is going to leave active traders extremely edgy; bulls will be bailing out and bears will be gaining confidence in equal measure and the resultant order flow could see us right back down at last weeks's low - which would be unpleasant.

Longer term traders and bitcoin investors can afford to be a little more sanguine.  After-all, if we are moving back into a broad range, between say $110 and $150 this can be tolerated for as long as it takes as it does nothing to invalidate the overriding investment thesis.

So, there you are, slow days are never pleasant - particularly for active traders - as they leave one far too much time to ponder.  For us however, the overarching rules do not and have not changed.  You pick your levels above and below price and you have a plan for what you will do should price breach them

And that's your lot for today.

Toodle Pip!

Rob @ BitScan