up to you

Bitcoin Trading: Advance or Decline - It's Up To You

Bitcoin price has returned to its support floor for the third time in 2015. Traders must now decide what they want for this chart. The choice seems obvious - provided you understand the value of Bitcoin and its role beyond our generation.

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Bitcoin Price Analysis

Time of analysis: 13h07 UTC

Bitstamp 1-Day Chart

Bitstamp 1-Day Chart

From the analysis pages of xbt.social, earlier today:

Our long-term outlook of a zigzagging consolidation to the support floor near $220 and 1400 CNY now looks complete.

Price has advanced in 5 waves from yesterday's low and there are several indications in the chart that price may begin advance from current levels - with one caveat that will be discussed in a minute.

All the momentum indicators have reverse diverged to previous price lows. RSI (second from the top) and the slow stochastic (dark line, top) has reverse diverged to the price low made in January 2015. Yesterday's low only made a higher low and hence the reverse divergence should now exert an upward force on price action.

Price had retested the support near $220 and 1400 CNY in a declining ending diagonal and the subsequent advance sows 5 clear waves to the upside. We can, therefore, assume that decline has completed and that price should now begin advance.

An uncomfortable truth is revealed by the moving averages. The 20MA (green) is falling strongly toward the red 200MA in the daily chart and their cross-over is a bearish chart signal. The point of cross-over looks to occur within a day or two. This chart indication does not fit with our outlook for the start of a larger advance. Or does it?

The bearish 20MA/200MA cross-over could be mitigated if price surges strongly upwards in the coming days. This will have the effect of pulling the 20MA out of its descent. However, the cross-over is an unavoidable fact in the chart. The proposal is that price may surge higher in an A wave, then correct downwards on the cross-over - forming a B wave to a higher low - and, finally, a C wave to higher highs as the 20MA crosses back above the 200MA. The result would be an ABC - the initial wave 1 of a large advancing diagonal.

The worst case scenario is that the 20MA/200MA pulls price to a new decline low below $200 and the bitcoin market continues wallowing in negativity and short selling down there. Somehow, it seems unlikely that this outcome suits the largest players in this speculative market.

I’ve found you’ve got to look back at the old things and see them in a new light. - John Coltrane

Summary

The chart has two clear options for the path of price. The potential for additional downside exists but, equally, a multi-month consolidation between $220 and $300 means that the stage has been set for a rally to long-forgotten areas in the chart: $400 and $550. Despite an onslaught of recent negative mood the support floor has held and we now prefer upside.

Bitfinex orderbook depth and Buy/Sell Volume:

 Bitfinex depth buysell volume 11h40 230815

Click here for the CCN.LA interactive bitcoin price chart.

What do readers think? Please comment below.

This analysis is provided by xbt.social with a 3 hour delay. Read the full analysis here. Not a member? Join now and receive a $29 discount using the code CCN29.

Readers can follow Bitcoin price analysis updates every day on CCN.LA. A Global Economic Outlook report is published every Monday.

Disclaimer

The writer trades Bitcoin. Trade and Investment is risky. CCN.LA accepts no liability for losses incurred as a result of anything written in this Bitcoin price analysis report.

Bitcoin price charts from TradingView.
Image from Shutterstock.


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Comments that are not story specific will be removed.
  • sjs

    Sell off will overshoot but of course as always it will be impossible to pick the ultimate low. As low lows diminish it will be time to get ready to repurchase equities on acceptable returns. If China moves into QE the outcome will be hugely difficult to predict. So far Gold and Silver have dissapointed (manipulation by the Fed and it’s bullion banks not verifyable). Bitcoin has been a non-event so far and Litecoin halfing leading to increased value for LTC is a misconception. Dash is stillborn. The calm is now over, the storm has started.

  • Unterhashing

    Yes, we are definitely in risk-off mode. The question, as always, is how far into it we are. Measures of fear have hit levels last seen in 2009, which suggests to me we are close to a bottom (at least short-term). So, as an investment manager/ asset allocator, where do you go? Commodities are in a brutal bear market and if the problems in China are as big as people say, are unlikely to recover soon. Bonds present little value and are arguably the most over-priced asset out there. Cash? That isn’t a long-term option for me, just somewhere to hide.

    That’s why I feel that ultimately investors will have little choice but to come back to equities.

  • sjs

    Premature move – wait.

  • sjs

    ALL bets are OFF now. Deleveraging has started and will compound rapidly.

  • lakawak

    The people selling (rightfully) no longer believe that bitcoin IS a potential store of value. And the price went significantly below $200 in January. It was then artificially propped up by making it easier to mine them, adjusting the hashrate well before it was scheduled to be. The natural progression would have made the price go even lower had they not done that since it was reaching a price that was less than the cost to mine.

  • lakawak

    So it has come down to BEGGING people to accumulate greater losses just to stop the natural progression of the price?

  • doggiepuke

    Of course decline into the $100s is possible, but short selling into that range would be reckless as it would destroy Bitcoin’s selling point as a potential store of value. It has been range bound between $210 and $316 all year, going under $200 would breach support on the weekly chart that has existed since Bitcoin started trading. It would be years until confidence could be restored (if ever), and traders would be ruining a market instrument as valuable and profitable as Bitcoin. Bitcoin isn’t just a speculative instrument anymore, either, some people get paid in it and use it as a sort of savings account. I’m a (non-leveraged) trader too, and I understand the appeal of easy profits short-selling a security where there is so much uncertainty and doubt, but we are about to drop Bitcoin to the floor and grind it in like a roach on a rug.

  • Milly Bitcoin

    Of course people are predicting lower levels when the stress test begins in sept.

  • In search of a Japanese Wife

    Today is one of those rare days that I agree with you Milly.

  • Milly Bitcoin

    Buy! Half into Bitcoin and half into stock market that just crashed.