In a double-whammy of price-meets-trendline and a catalytic announcement of Paypal enabling Bitcoin payment, the Bitcoin price surged over $50 in a few hours during yesterday's US trading session.
Steady Advance or Swift Correction?
Bitstamp 4-Hour Chart
The chart shows yesterday's surge from $394 (at the orange trendline) to $452. The last price candle on the 4-hour charts across all exchanges shows a trading gap - clearly inaccurate - but a strange anomaly, nonetheless.
The Fib extension tool has been adjusted to fit the resulting price action, as well as the presence of existing support and resistance overhead.
The first interesting outcome of readjustment of the Fib extensions is that the 2.618 extension (last night's price target) overlaps with a long-standing trendline that connects the decline lows of December 2013, February 2014 and the support zone of April/May 2014. The trendline is annotated by the light blue thick dashed line.
The prospect of continuing advance has an immediate target at $465 (the 4-hourly 200-period moving average) and beyond that the 3.618 Fib extension at $474. Eventually, we would expect the Bitcoin price to attempt $500, then $600, and then the tough resistance at $680. Easy as phi, right? Not so.
Easy Does It
Upside potential, at this stage of wave development, is limited by the 200-period moving average. The 200 MA is currently declining slowly toward $465 and may eventually intersect with the rising light blue dashed trendline that halted last night's advance. All things remaining equal, and with the advance continuing in its usual stair-step fashion, the 4-hour chart would soon see price reach the 200 MA, but with the companion 20 MA lagging below. This set-up, namely price frontrunning the 20 MA whilst below the 200 MA, typically forces correction. Weekend analysis will explore this phenomenon in greater detail.
However, before we get fixated on immediate advance, let's remember to cover our trading backside and consider what downside potential still exists.
Downside Potential For Bitcoin Price
Bitstamp 15-minute chart:
Last night's enthusiastic surge catapulted price back inside the declining channel and, at the time of writing, price is testing the lower decline channel trendline (dark blue solid line). It cannot be ruled out that yesterday's exuberance merely completed an upward correction before the market resumes decline to $200 as discussed in Sunday's in-depth analysis.
Should price once again dip below the dark blue channel trendline, we would have reason to suspect resumption of the decline. However, it would be best to wait for confirmation of decline by seeing price break below the long-term orange trendline. Until then, any price action below the dark blue channel trendline should be interpreted as corrective wave action pending a move toward $465.
Economic Data and Announcements
Yesterday's flash manufacturing data for China and France came in slightly better than expected and for Germany, less so. However, Canada released a poorer than expected Core Retail Sales figure. These numbers can be seen in the CCN Economic Calendar.
Paypal Payment Hub
Paypal's Bitcoin acceptance is not total nor is it global - the Bitcoin payment facility being available only via the Paypal Payments Hub in North America. Nonetheless, this first tentative step is significant and is unlikely to be a temporary experiment: Paypal are, by their own admission, introducing the Bitcoin payment facility in stages and a region-by-region manner.
“PayPal has always embraced innovation, but always in ways that make payments safer and more reliable for our customers. Our approach to Bitcoin is no different. That’s why we’re proceeding gradually, supporting Bitcoin in some ways today and holding off on other ways until we see how things develop.”
US and Israel Strike Syrian Targets
The US military has launched missile strikes against ISIS targets in Syria, with Israel quickly downing a non-ISIS Syrian fighter in the excitement.
A Chinese naval destroyer is deployed in the Iranian port of Bandar-Abbas, and Russia began an unannounced military preparedness drill over the weekend. Either all parties had come to an agreement following their stand-off, last year, over US strikes on Syria - or - the US has just switched on the house lights at Fight Club. Bitcoin has yet to show its performance during open war.
Wednesday 24 September
14h00 US New Home Sales
expected: 432K (previous: 412K)
CCN hosts a summarized Economic Calendar showing the week's main data releases.
Updates to this article will be made during the European and US trading sessions should any significant events 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.
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