The Asian trading session has pulled price up from last night's lows near $470. There are still few clues as to where price is heading, but at least one more low is expected as the analysis below explains.
As identified in yesterday's analysis a descending channel has contained price action for 11 days running. Price has respected the lower channel trendline since first hitting it during trade on Sunday 31 August. This trendline is currently overlapping with the 0.618 Fibonacci retracement level of the entire advance from April to June, and that implies strong support at current levels.
Ordinarily one would expect price to react by bouncing away from strong support. However, the little bounce that did occur has caused the MACD indicator (hourly chart) to indicate reverse divergence - a strong signal that at least one more low is in store. The reverse divergence between price and MACD is marked with dashed magenta lines on the chart above.
Hence, we could expect that Bitcoin price will return to the lower trendline during the course of today. If a reversal does occur around $460 then, we would have some confirmation that the wave contained in the green channel has completed, and it would be labelled wave c. If price were to breach the trendline and break lower then, there would be reason to expect a lower low at $412 and a wave iii label would apply. Along with the wave iii label comes the prospect of a decline low nearer $350.
According to the view that an upside reversal is imminent, the 15-minute BTC-China chart gives a clean wave count and shows that the final wave v is due (if not already in progress).
The following 4-hour Bitstamp chart expands on the bullish and bearish scenarios by showing the implications that a bullish or bearish break today will have on potential paths of price action over the coming weeks.
As discussed in Sunday's in-depth analysis report, the irresistible pull of the 200-period moving average will find price back above $500 sooner or later.
The question is where reversal will occur - and for that we have to be patient... unless the truth is contained in a light-hearted reddit post from this morning that alleges a correlation between Google search interest in Jennifer Lawrence and the price of Bitcoin.
Bitcoin Price Analysis Summary
The current analysis has no definitive answer for where trend may reverse. The expected price levels are clearly defined for both bullish and bearish outcomes, yet, at this moment the only reasonable conclusion is that trend is still pointing down until confirmed otherwise.
The lowest defined trendline currently cuts through the low $400s where a target of $412 awaits. That decline will even reach that low is not certain at this stage.
Updates to this article will be made during the European and US sessions should any significant changes come to light.
The writer is fully invested in Bitcoin via BTC-e and Bitfinex. Trade and Investment is risky but not as risky as some other things out there. Take care only to take action in the market when you are 100% sure of the outcome. CCN accepts no liability whatsoever for losses incurred as a result of anything written in this Bitcoin price analysis report.
Featured image from Shutterstock.
Last modified (UTC): July 12, 2015 10:45 AM