Bitcoin price will make many people rich this year. The bullish prospects are self-evident and a steady parabolic advance, some time this year, will give bitcoin traders what they want. Bitcoin price waves, like all market charts, advance and decline between established support and resistance zones.
Lots of discussion in yesterday’s comments section. Many readers expressing annoyance with the fact that my analysis is persistently bearish and I replied with clarifications as to why this has been the case since the start of the year. Also, some accusations that analysis opinions have frequently been “wrong”.
Perhaps so, but readers should be aware that this analyst is not in the business of soothsaying. The objective is to analyse the chart’s technical indications with an eye to determining possible scenarios going forward. Actually trading those scenarios is discussed, in depth, and practically applied at xbt.social.
The outlook remains biased to the downside – that there is likely to be a test of support at $400 (and possibly $300) before meaningful advance happens. During the 4 months that this outlook has been offered in these articles, there has been no new high – no advance out of the existing trading range – and the analysis assessment has, therefore, not been “wrong”.
Those readers who keep an eye on other analysts’ views will know that Venzen Khaosan is not alone in this bearish perspective. Yet, since there is widespread resentment against the bearish view, ongoing commentary of the bullish outlook will be presented – even if price declines.
Time of analysis: 14h00 UTC
From the analysis pages of xbt.social, earlier today:
The attached 1-day chart is annotated with significant support and resistance (S&R) zones since April 2014. Their levels and boundaries are merely subjective, as all analysis and opinion always is.
During 2015 bitcoin price found support at $200 (green) and battled with $300 resistance (blue) until October 2015 when price reached for $500 via a parabolic year-end rally. Correction of the advance found support at $300 and the previous resistance level became a support level, a typical S&R dynamic of all market instrument charts.
A market push back toward $500 in December 2015, and again in January 2016, found resistance at $470 (red). Why not $500? Note that the $470 level capitulated during a May 2014 correction (extreme left). $470 also happens to be the 0.382 Fibonacci retracement level of the entire 2013 mega-rally.
During 2016 the market seems to have established $370 as support (orange). This is the level of the April 2014 low, that also acted as a corrective pivot during October and November 2014.
Last week, the market attempted $470 for a 5th time since falling below it in September 2014. The attempt failed for a 5th time. Nowhere in the bitcoin price chart is there any precedent that implies that a 6th attempt will be successful. $470 is clearly a formidable resistance level.
There is, however, a precedent in the bitcoin (and many other) price charts that typically sees price fall back toward lower support after repeated failed attempts on a particular resistance level. A decline to $300 – if price goes that low – should be fairly quick and it could potentially cause a strong bounce from support, thereby launching price into the rally the market wants. This would be the best outcome, and the reason why I have been biased to the downside.
Declining to support at $370 involves price crossing below its 1-day 200-period moving average. Trading below the 200MA is, in its own right, a bearish technical indication and this is why this analyst has offered the possibility of a return to $300 (blue zone). Not because of any resentment toward bitcoin or any compulsive bearish tendency, its merely a deduction based on chart analysis of the most rudimentary kind.
Of course, in the current low volume exchange orderbooks, and during low liquidity weekend trade, the bulls can buy price back up to $470 – and even to $500 – thereby breaking resistance and igniting a rally with wider participation, higher volume and an easy target at $550 (purple zone).
Hold on a minute. Look at the momentum indicators:
MACD (panel just above price chart) is at its upper Bollinger Band and diverged from February’s lower high (this adds bearish bias).
The stochastics (top panel) had diverged on the recent high and are now falling away from their upper maximum. Their destination is their lower minimum during which price will, for the most part, decline. Only a definitive upward reversal will prevent the stochastics (and, therefore, price) from making an obligatory technical journey south.
The analysis outlook remains biased to a bearish outcome – that price will decline to support (at least $400 but more likely $300, Bitstamp) before advance to a new high occurs. This is a view based on technical analysis. Both the analysis and the view could be wrong but, so far this year, it has not yet been proven wrong.
Despite bearish technical conditions, the bulls may stampede in the current low volume market and break above resistance. The opportunity exists and the bulls can seize it at any moment. This scenario is likely, but less likely than the bearish scenario, as unpacked in the discussion above.
If there is a sudden and miraculous price rocket that clears $470, then its primary target should be $550 and eventually $690 and $1000. This analyst could be wrong about that, but my deduction from the chart I prepared, above, makes this my best assessment.
What do readers think? Please comment below.
Readers can follow Bitcoin price analysis updates every day on CCN.LA. A Global Economic Outlook report is published every Monday.
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.
Last modified (UTC): April 30, 2016 20:34