So, it's been a very quiet week for bitcoin as the market continues to consolidate. In our last post we highlighted the fact that the resistance zone up at around $960 (Gox) would be a tough nut to crack and this has proven to the case.
Let's have a closer look using a chart:
As you can see, the resistance zone (re-numbered 1 on this chart) did hold and this confirmed the presence of a downward sloping resistance line. However, see also that the sell-off this triggered was reversed (at point 2) inside the $835 level that has been so significant in the past.
When considered together, we can't help feeling that the wedge formation transcribed across recent highs and lows is starting to look pretty long in the tooth. Both buyers and sellers have tried on multiple occasions to drive the market through its limits (to gain supremacy) but neither have been able to do so.
In the absence of a change in the fundamental (underlying) picture, we consider it most likely that the market will simply continue to trade sideways in the short term, with the $860-830 zone as support (and a rational place for active traders to enter long) and $960 as resistance (and a rational place for active traders to book profit).
Given that the long term trend remains UP we would not countenance establishing or advising a net short position (only buying at support and booking profit at resistance) but we are equally clear that a plunge below $835 would change the short term outlook, sending us back down to $750 in all probability, and potentially lower still.
In the meantime, however, bitcoin looks more and more like a market establishing a range, within the overall context of an up-trend. This situation might last a day, a week or months and for active traders it presents an excellent opportunity to swing trade (between support and resistance). Investors, on the other hand, need only to sit on their hands :-)
And that's all we have for now. Enjoy what remains of your weekends and we'll report back as the new week unfolds.
Rob @ BitScan
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