So the market tagged $450 (on Gox) over the last 12 hours and we've seen a bit of profit taking since.
Here's how it looks on a chart:
Based on what we see right now, bullish momentum looks finally to be waning, for the moment at least.
On the chart you can see that the market has dipped below the steepest (red) support line. This is potentially significant from a technical standpoint and could be heralding a further decline to the next steepest rising support line, shown here in green. Having said this, the current 4 hour bar is yet to close and bullish sentiment in bitcoin has been so strong of late that we wouldn't be in the least bit surprised if the current dip were reversed in toto.
As usual, we never know but given what we see here 3 potential scenarios can be envisaged moving forward:
1. Asian buyers rush in on the current dip, reversing order flow and driving price back through the highs.
2. The current sell-off accelerates, targeting the next steepest rising support. In this case watch the $365 area for a potential bargain long entry point, as this is where rising support currently intersects with horizontal support.
3. The market essentially trends sideways over the weekend, in which case we can expect new buyers to come in higher, perhaps in the $380-410 area as we've indicated on the chart.
So, where does this leave us?
Firstly, we think that anyone contemplating hopping in long here - or even on a breakout higher - might need to brace themselves for a meaningful 'paper' loss, if only for a short period. This market has traveled an enormous distance in a short period and another retracement would not be unreasonable at this point. Following this rationale, anyone needing to liquidate/convert back to fiat in the short term should - in our view - go right ahead and do so at current levels; its not sporty but its cautious.
Beyond this, we would advise bitcoin bulls, looking to get into or add onto existing positions to watch the price points we have identified here carefully as you may be able to pick up a bargain should the market choose to test the limits of its existing bullish condition.
As usual, we will keep you updated as the situation develops.
In the meantime, have a great weekend.
Rob @ BitScan