Bitcoin trade bought price up from a low of $272 and 1660 CNY yesterday. At the current level near $280 and 1720 CNY price is in an indeterminable state of trend. Analysis looks for direction and an action plan for taking a position in the market.
Time of analysis: 05h52 UTC
From the analysis pages of xbt.social, earlier today:
Price has bounced from the low and maintains altitude.
The 4-hour Bitfinex chart shows price in an awkward “hanging” state – above the red 200MA (longer-term bullish), but below the green 20MA (short-term bearish).
The MACD indicator (bottom) had formed reverse divergence to the very bottom of the previous low and this is, typically, a sign that reversal to the upside is due. RSI (second panel from the top) has not diverged to the same extent as MACD, but red reverse divergence dots are sealed by a final instance of regular divergence on the very last low – notice that there is not a red indication of reverse divergence – another sign that a wave low had been struck at $272.
Our intention is to take a position in the market according to our expectation of continuing advance. If our assumption is wrong then we stop out at minimal loss and seek the next opportunity. Yet, how safe is an entry at the current juncture of price action?
Realistically, nothing precludes price from making a double bottom (at $272) or a marginal new low: the chart indicators may simply diverge in such event and still remain true to their character. Arguments can be found, at smaller timeframes, for both resumption of advance and continuation of decline. Although we favor advance in the present chart, the scenario of massive decline has not yet been ruled out.
In the chart above, a magenta circle in the xbt.social stochastic indicator highlights a similar juncture and price pattern to what we have this morning. In that previous instance the faster stochastic rose from its floor, but instead of heralding a new upswing it diverged (red dot) and price then proceeded to make a marginal new low before the next advancing wave began building a base.
Given that price pattern, we should hold back on our entry and wait to see a base form. Our entry will then be signaled by the standard xbt.social buy starter-gun – minimal risk, higher probability and the profitability our trading method is designed for.
Formal education will make you a living, self-education will make you a fortune. – Jim Rohn
Frequently taking positions in the market is a bad habit that traders easily fall into. Reasons for doing so include “revenge” trading, wanting to feel like a “hard worker”, compulsion, and desperation. Yet, more money is lost from ill-informed trades than can be saved by simply remaining out of the market and patiently waiting for those glaringly obvious trade opportunities that jump out of the chart once in a while. Successful trading is about mastery of self and its objective is to make the best trades. Money naturally flows to the calm and patient trader.
Bitfinex orderbook depth and Buy/Sell Volume:
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Bitcoin price charts from TradingView.
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Last modified: July 19, 2015 17:47 UTC