The Bitstamp daily chart dropped very close to the rising long-term support near $270 and printed a low of $277.
The price lows are not being confirmed by the RSI and MACD indicators that are showing severe divergence from price. On a daily chart, divergence implies strong reversal. However, there is still room for further decline as the following hourly Bitstamp chart illustrates.
The chart is busy with indicators, and I apologise for not elaborating on their significance at this time. Instead, I want to point out the role of the monthly price pivot level that is currently supporting price at $278. Below it, pivots at $262 and $255 present potential targets for decline.
It is proposed that price may breach the long-term support (annotated in red on the daily chart, above). This outcome is discussed in the longer term analysis below.
BTC-China’s Yuan price fell toward rising support and touched it before pulling higher to form an uncertain Doji candle. Strong RSI divergence from price is annotated in magenta.
The BTC-China chart has a price pivot support level at 1,590 CNY. Additional decline, if it happens, may target that price level.
Although long-term support has been tested – and held – there is no reason to believe that price may not hook down below it to plumb the depths. Instead of trying to call a bottom at this important juncture, analysis in the coming week will look for confirmation of reversal and alert readers to potential entry points into the market.
The current exchange charts do not show price history prior to 2012 and for this reason it is necessary that we look at the reviled Mt.Gox’s long-term chart.
Notice that the death-throes of Mt.Gox saw price fall to the same rising support that is currently defining price action. The Elliott Wave label “IV” marks the occasion back in February 2014. Although not clearly visible in the chart, there had been a strong bounce off of the rising trendline with buyers taking price from $98 to near $350. This fact adds weight to the long-term support’s significance, and we may well see the supporting trendline capitulate this time round too.
However, there are some caveats. The following Bitstamp and BTC-China charts extend the price history and wave counts provided by the Mt.Gox chart and show some potential paths of price action going forward. The wave count is not definitive – Elliott Wave counts rarely are – and will be updated as and when price action shows other possibilities. Reader @adaysun provided a similar chart in the comments section here and made a good case for alternate wave counts.
I lowered the upper channel trendline in this chart to highlight the possibility of “over-throw” and “under-throw” from the channel. When price throws over the upper channel trendline, it is often a warning that we can expect price to throw under the lower channel trendline. We don’t know that this will happen, but the possibility is being highlighted. It is exactly the kind of cunning trickery that one would expect in the Bitcoin price chart: dip price below multi-year support to unburden panicking sellers of cheap bitcoins – buy them at bargain prices – and have price jump back above support for the advance. Such “under-throw” can last for minutes or even weeks.
If the wave count is correct and the channel truly defines future price action, we can see that the upside expectation for price is astounding. The chart is in log-scale, so the righthand scale increases exponentially. No price is being predicted here, and it must be emphasized that the projected path of price is only a possibility based on standard Elliott Wave Principle. What will materially transpire in the Bitcoin price chart remains to be seen.
The BTC-China chart shows another possibility for price in the coming months. In this case, the price channel is assumed to hold, and price is shown making a new all-time high but not to the upper channel trendline.
Not shown in the charts above is the fact that price, after completing wave V, may very well correct all the way back down to $55 (500 CNY) before embarking on the next five waves of advance.
The Bitcoin price is flirting with long-term support. At the time of writing support has held price above $270 (1,600 CNY). According to price pivots in the charts, additional decline is possible to at least $255 (1,590 CNY).
The end of decline has not been confirmed yet, and traders and investors are urged to wait for confirmation of advance before positioning. Avoid the impulse to position too aggressively until advance is confirmed and underway. There are plenty of green pips waiting above so, for now, remain patient. Any strong price movements (both up and down) are likely to be retraced quickly by skittish traders in the current low liquidity.
CCN hosts an interactive Bitcoin price chart and market metrics such as the Buy/Sell volume indicator above.
Readers can follow Bitcoin price analysis updates every day on CCN.
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: January 4, 2015 16:38 UTC