Time of update: 11h30 UTC
Divergence has forced price down and it is correcting before moving toward the target discussed in the trade setup in the original analysis below. Since volatility is picking up as we go into the US session, I would like to alert readers that those already in this trade should make allowance for price to correct to the lower channel trendline (white) that has become apparent.
The trade setup discussed below is offering a second entry point as price bounces upward off either the lower white channel trendline or the blue price pivot at 1,730 CNY.
The 4-Hour BTC-China chart shows price advancing above long-term rising support (original longer-term chart here), as well as a succession of four higher highs since Sunday’s low at 1,578 CNY ($255 Bitstamp).
Price has both closed and re-opened rising candles above the 20-period moving average (green) and lack of divergence in RSI as well as a rising MACD implies that price is targeting either (or both) the blue 50MA and the rising Fib fan line currently near 1,833 CNY.
Getting closer to the price action in this hourly timeframe chart, we see better definition of local support and resistance. The chart is apparently cluttered, but a brief overview will simplify the reader’s view:
1. The horizontal lines to the right of the chart are price pivot points that come standard with most charting applications.
2. The curved lines and shaded areas visible in the rest of the chart are moving averages (MAs) and their standard deviation envelopes. Some of the MAs have been shaded below their centre line, and this accounts for the brown areas behind the price candles. Our focus is not on the shades but the MA lines themselves.
In this hourly chart, price can be seen advancing above the green 20MA. The 20MA has risen above the blue 50MA. Currently, the last yellow candle is rising above the confluence of the orange-brown 100MA and a price pivot level (blue) around 1,730 CNY.
The fact that both the orange-brown 100MA and the blue price pivot had been tested by three red candles gives us some confidence that the 1,730 CNY level will hold and that price will advance to the next immediate resistance pivot at 1,805. The path of price action will not be a straight line, and once price achieves 1,805 CNY we may see a correction before the final spurt of advance to 1,833 CNY identified on the 4-hour chart, at top.
Advance is likely to be strongest once the green 20MA crosses over the orange-brown 100MA. At some point, price may also fall back to get support from the green 20MA. A safeguard for this trade is a stop loss just below the 20MA, adjusted to breakeven (your entry price level) once the 20MA advances above the 1,730 pivot (or 100MA – whichever happens first).
Price is showing the initial signs of at least an intermediate advance by having established action above the 4-hour 20-period moving average. The hourly chart confirms this initial bullish sign and a potential trade set-up for the Asian session is outlined above. Entry is between 1,715 and 1,730 CNY. Stop Loss is just below the 20MA and should periodically be moved upward as the 20MA advances. Although the expected target for this wave of advance is 1,833 CNY, Take Profit is at 1,805 CNY.
Once completed the advance would have brought price near 1,833 CNY in the vicinity of the hourly 200MA where a larger downward correction should occur.
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Disclaimer: The writer trades Bitcoin. Trade and Investment is risky. CCN accepts no liability for losses incurred as a result of anything written in this Bitcoin price analysis report.
Last modified (UTC): July 12, 2015 12:15