Bitcoin value (price) has rallied for the second day running and earlier reached a chart resistance level at 1590 CNY and $257. More highly valued bitcoins are always welcome, but it looks like the price chart will correct before advancing higher.
From the analysis pages of xbt.social, earlier today:
The 1590 CNY ($257) resistance level saw a market reaction and price bounced at the 1-hour blue 50MA. The structure at the top left of the price chart could be what we’re in for next. Before jumping to pattern-based conclusions, there is also the possibility of another subwave of advance.
The market had made a lot of headway in an advancing diagonal, and the 1590 CNY target was a natural level to take profit. The diagonal wave may have ended there, meaning we are now in the initial phases of decline back down to the yellow trendline.
We do not know that the diagonal is complete. Firstly, it doesn’t look complete: it did not touch its upper channel line as is the usual behavior for such wave types. It could be that the resistance level stunted (or “truncated”) the final 5th wave, but we cannot yet assume that. Until price drops out of the lower channel trendline, we have no certainty that the wave may not make one more surge to the upper channel line.
The indicator divergence is annotated in magenta, and then, on the latest dip down, a cyan line under RSI indicates an instance of reverse divergence. Reverse divergence following an upside instance of regular divergence, usually implies that the uptrend has another high in store.
The latter “rule of thumb” is not a principle to open trades by, but it does warn us to wait for confirmation that the advancing wave is complete before making downside bets.
Once price dips below the lower channel line we can know that additional upside is unlikely, and then we have to determine if price is forming a sideways correction or if the market wants to avoid wasting time and sell-off in long red candles to below.
If a strong sell-off does transpire then, it will not target the yellow trendline in a single declining wave. At least three wave will unfold en route. Also, although we are using the yellow trendline as a target but will have to choose a nearer target to avoid getting caught in the corrective wave on the way down. A good take-profit level will be the Fib line directly below, or the 200MA at either the 15-minute or 1-hour timeframes – see which gets struck first.
Bitcoin price may continue advancing if the market can buy with extraordinary effort at the current resistance ceiling. The more likely scenario is a decline lower in three waves before a more sustained rally back to $300 and 1900 CNY.
Earlier today the Bitfinex Buy/Sell indicator was full-tilt oversold as 7,500 BTC were liquidated within 15 minutes.
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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 14:57