Well, our last post did turn out to be prescient, right? The wall of resistance above price at the time did prove too big a nut to crack and in the final analysis, the market made a double top at $1225 (Gox). The rest, as they say, is history.
Anyway, here's how it looks on a chart:
If the chart looks a little busy, that's because a lot has happened - so let's start with a little precis.
As it stands, we sold off through the previous support zone we had identified, between $820 and $900, and we've been as low as $580. We'd like to draw your attention to this low as it is significant.
Firstly, $585 is a previous horizontal support level in its own right. Secondly it is co-incident with longer term rising support (green diagonal line) and finally, it represents a 76% retracement of bitcoin's bull run, based on the last swing low. This represents a Fibonacci retracement of huge significance; had we gone much further a retracement of the entire move would have been on the cards but as it is, you can see that price has stabilized into a wedge consolidation pattern.
What happens next will depend on how we break but since the levels we are currently trading at represent the outer limit of this market's bullish context, they represent an opportunity to buy bitcoin at 'wholesale' or knock-down prices.
We have already been shopping and if we re-test the $600 area we may well go again.
Remember, the recent drop will have scared many. No-one 'likes' the idea of buying into such a vicious pull-back, but our experience tells us that the best trades are made with a sick feeling in the pit of your stomach.
As we have pointed out, this market was over extended. It has now pulled back to levels that make sense from a technical perspective and we have seen buyers come in at those levels. It looks really ugly, but this is when the brave muster the courage to trade. And this is why they clean the clocks of the many, who will fear to trade until price action provides them with more confidence. And by this point the opportunity has passed...
Rob @ BitScan.