Bitcoin price chart is consolidating in a range - presumably leading up to the SR wallet auction later this month.
After correcting the recent rally to $538 (Bitstamp) and within $2.50 of the $520 downside target (Bitfinex) forecast in my last report, Bitcoin price has seemingly turned it's attention higher and is showing signs of consolidating for a rally toward $700.
Update 2 (21 June)
Bitstamp (hourly) price action has returned to the level of the apex formed by the two converging trendlines at 592. Momentum indicators in hourly and four hourly timeframes have room for more upside, but 15 minute (and lower) RSI is overbought. Slight price movements of less than $10 are causing oscillators to swing from oversold to overbought, implying that a larger move is building up kinetic energy. It's difficult to anticipate what will be the outcome - rather than bet on a direction now, best let price break and then evaluate if it will slam back down or continue to the upside. If a consolidative triangle continues unfolding beyond the apex, then a narrowing sideways range will certainly test our patience.
Update (21 June)
Non-confirmation is increasing between Bitstamp and BTC-e... Bitstamp is achieving lower highs with difficulty while BTC-e keeps retesting support around 580. Earlier, BTCChina's price made a solitary lower low for the day. Either BTC-e must catch up by turning up (and the other exchanges start printing higher highs) or the non-confirmation is warning of a turn down. Resumption of the downtrend could see price decline by $50-$80 in a few hours. The way price action is unfolding is not giving clear indication of direction, so a dangerous time to be in the market. A strategy for trading any breakout up or down should have clear support and resistance levels defined and take care not to get faked out by a ranging move. The following hourly chart shows an important rising trendline that has acted as support on various occasions during Bitstamp's price history. This trendline has, however, been broken in the past. Circled in red are structures resembling current price action that have preceded strong declines in the past. A breach to the downside ($560 straight down, at the time of writing) would pave the way for decline to $500 and below. If it holds, the prospects of advance remain alive.
Update (20 June)
The title of this article has been updated to reflect extension of the correction. Price had broken to the downside from the wedge formation shown in the first chart below. Price may reverse at support around 575 although a last outpost at 550 could be the end of deep correction before a bounce back up. A swift drop to below 550 (the decline low is near 548) will signal continuation of the downtrend, possibly assisted by the fact that the US Marshall's Office accidentally blew the anonymity of auction bidders in a blundererd "Reply to All" email fiasco.. For the moment expectation is that the larger trend is up. If price action does not proceed higher in five waves immediately - and the small degree of current waves lends supports to this view - price may, alternatively, trace out a larger sideways triangle in the range 550 - 610 that will culminate in a breakout during the next week leading up to the SR bitcoins auction results. Updated Bitstamp 15min chart:
The following Bitstamp M15 chart shows the constraints and Fibonacci ratios currently pushing price into a decisive corner.
The same Bitstamp chart, showing more price history, and additional chart features reveal the expected primary and secondary targets at 631 (2.618 of wave "a") and 668 (3.618 of wave "a" of this advance). To the downside support levels at 575 and 550 may represent the extremes of the consolidative range..
The annotated Elliott Wave count is not - as some recent cryptomonkey arrivals like to allege - produced from my tailpipe. Years of experience with the Elliott Wave Principle has led me to the conclusion that the Bitcoin chart does not express impulse waves during declines (except perhaps at the smallest degrees). One other structural option remains, and I'll leave that for the mature members of the audience to know.
Notice that the Bollinger bands on MACD are contracting and with that repulsive blue circle cleared, price will have clear air to continue on its path to the attractors higher up and further right on the chart. If a larger correction is due then price will have to clarify the wave structure it is unfolding.
If price wants to go lower then that will introduce complexity and time to this sideways structure and 550 could be seen again. Complexity requires smaller waves so, alternatively, a decisive drop toward 550 would imply resumption of the downtrend.
The consensus view seems to be that there is some universal principle at work which demands that Bitcoin rallies to new highs every year. Will we have another high this year? Absolutely, positively? If the market does rally to a new all time high, we'll certainly all rejoice the fact and take our long awaited profits up there. Yet, I'm concerned about the guarantees for this year's rally. Price is behaving differently than in previous corrections - nothing sinister, of course - but there is nothing that says this market cannot range sideways for several more months.
Readers are well aware of my bearish views on the Bitcoin price chart, and I'd like to make it clear that my expectation of additional lows (or sideways consolidation) is not due to some inherent pessimism I harbor toward Bitcoin. Instead, it's a cautious view informed by analysis of the chart, as published in several articles in the past two months; a strategy to always buy in lower; and, cognizance of the enormous emotional investment, and with it, hyperbolic expectation, that commodities like Bitcoin and Gold are prone to. If the fever takes Bitcoin now, all those who are positioned right stand to gain immensely.
Realistically, Bitcoin can rally to new highs on a market whim, and we should always be prepared for that, but with recognition of the fact that Bitcoin rallies have historically been short-lived and have always seen price retrace 60% of the advance within a few days. My analysis here is a statement of what I read from the chart, not some influence I'm trying to exert on the market (ludicrous!) or some desire to be "right." Every previous analysis article has included both upside and downside prospects. Readers should comment accordingly or have their comments refused by the moderators.
Disclaimer: The author's opinions are his own and CCN accepts no liability for any losses you may suffer as a result of following the recommendations above. The analysis presented is speculative and markets go up and down contrary to attempts to forecast future price movements.
Featured image by Shutterstock.