Well, we hope you had a terrific Christmas break with families and friends. We certainly did, but its time to get back on the horse now and review what the bitcoin market has been up to while we weren't watching...
Let's start with a chart:
The first thing we'd like to draw your attention to is that the market has traded out of the steep down-trending channel that had been dominating the technical picture since mid-December. This is great news for bitcoin bulls. Second, having broken free of its clutches, the market rallied through resistance at $750 (Gox) to re-test the next resistance wall at $835. This is a further indicator of latent strength. Having failed to pierce this level, however, we have seen the predictable sell-off, to retest previous resistance (at $750) as support.
As I write this post, we are witnessing a healthy rejection of this key swing point, which is going to dictate which way the market trends in the near term. If buyers continue to join this nascent rally, we are going to re-test $835 and if that goes the stage is set for a further punch North to around $960. If, on the other hand, buying power evaporates $750 will eventually give and in that scenario $675 and $585 below it will quickly hove into view.
Our sense is that having endured a meaningful sell-off its going to take this market a while to recover its mojo, and that's going to happen (or not) as market participants detect more and more evidence of strength on retests of support.
Market reversals never look pretty or convincing in their early stages - always teetering on the cusp of reversal - and this is what keeps the majority from taking the plunge. But bear in mind that by the time it looks obvious to you that the rally is on - because you are seeing big bull bars - it looks the same to everyone else and more often than not, the profit potential is already evaporating as the early (brave) traders use the very re-kindled euphoria that is tempting you in, to liquidate their positions, thus reversing the cycle against you.
The bottom line is that making money in any market consistently, demands in us the bravery to buy against support and sell against resistance. A good trade rarely looks good when you execute it...
In any case, we'll keep our eye on things for you and report back as the situation develops.
Until then...
Rob @ BitScan
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