No Elliott in sight
In my last post about Bitcoin I was fairly convinced that we have entered the final stages of the Elliott wave theory, but looking at the charts today it’s clear that it wasn’t exactly true. The market started going sideways in the last few days of November and continued to do so for an entire week of December until on the 8th of December the bears finally gave up and bit the bulls in the ass hard. As I saw it unravel I tried to get rid of the coins I was holding, but I wasn’t fast enough and my exchanger was no idiot either… So I’m still holding them for now.
Third time’s the charm
I don’t want to sound overly pessimistic here, but there’s clearly a pattern to this. Because of the latest breakout we could very well be seeing Bitcoin test our support level around $320 for the third time. The gap between the last two would mean it’s about to happen…
The candle that closed on the 21st of November is above the one that closed on the 10th of December indicating that we’re moving further down the chart. The green bull you’re seeing at the end isn’t anything significant, it’s just showing us that the bulls are here and aware of what’s happening. Not sure if they can do anything about it at this point.
Elliott hasn’t gone anywhere… yet
Right now the 5th wave of Elliott can still be seen and I believe we will see it down the road. The question is when? The bearish candle that closed on the 10th makes a pretty good starting point, don’t you think?
Riding the bulls
The last few days have simply been amazing. On the 9th of November I published a short article about the bullish movement of Bitcoin and just three days later the price has reached $400 USD.
So what now? If you look at what happened on the 11th and 10th of November then you can see a great struggle between the bulls and the bears. The market was unsure how to react, but it is clear to everyone now that bulls have won this battle. At least for the moment.
Depending on how today’s candle will close we might see another one, perhaps a bit smaller to form tomorrow.
The only thing that bothers me is the RSI which shows that we are reaching the overbought market condition very soon. When this happens you can expect a short price decline all the way down to $360 area, but it’s unlikely to hit that low.
Why? Because not only did the Thailand mining rig burn down, the FBI closed a ton of hidden services recently which means that a great portion of Bitcoin users just lost their Bitcoins. This should in theory make the crypto currency even more expensive so the bullish momentum might just be gaining its strength to a much higher level that what we’ve seen this far in which case our next stop will be around $440-$450 and upwards!
Bitcoin price trend
When you look at the overall chart you can clearly see that the price of Bitcoin has gradually declined since June 2013. However, the lowest point of around $280 was reached in October and it hasn’t been touched any more. It seems to me that there is a great potential for trend reversal especially because the last three days have closed higher than the previous.
We have to wait a little longer to confirm this, but things are looking rather good in my opinion. Remember 10 days ago where I didn’t recommend opening a position at all, but if you really had to, I suggested to go long? (Read more about it here: http://ynef.net/bitcoin-price-acting-as-expected-is-it-time-to-open-a-long-position/). It’s never a good idea to trade against the trend, but going long should make sense right now.
Right now the $360 area seems like a solid resistance level. If we break this level there is great potential for further upward movement. In long term it’s already a good idea to buy a few Bitcoins and just sit on them for a while. They’re bound to go higher eventually.
When you look at the MACD indicator you can see that when the lowest point was hit in the first half of October the two lines crossed higher than previous in the second half of the same month. There’s a big chance for the crossing to take place again any time now which should drive the price even higher. Also notice how MACD keeps making higher lows!
The bulls have returned
Just three days after I published my bold Bitcoin price prediction the price has behaved exactly as predicted.
After gently touching the $280 area the price held steady on $350+ for a few days and later climbed to $400. In my previous article I mentioned how media can influence buyers and sellers:
” I wouldn’t be surprised when in about a month Bitcoin will receive more media coverage and everyone would be saying that it’s the perfect time to buy more coins due to the relatively cheap price compared to what it was 6 months ago. “
I guess my timing was way off! I predicted this to happen in about a month, when in fact the important news coverage happened just 3 days later. Read the article that says to buy more Bitcoins here. Let me quote:
“Now is the time to take two hands and buy buy buy. I expect a sharp rally to $330-$350. The price will consolidate around those levels and build a base for a move higher into the year end.”
Almost exactly the same as I predicted in my previous article. It seems that the psychological support level of $300-ish held nicely and with a little help from the big boys (media) Bitcoin prices are on the rise once again.
My own technical analysis
My personal setup however is still showing clear signs of a downward trend. The MACD (Moving Average Convergence-Divergence) indicator has opened downward, is expanding and making lower lows.
The RSI (Relative Strength Index) is not showing any signs of Bitcoin being oversold which would mean more buyers on the market although I’m sure it will get there eventually.
Basically the fundamentals (news) are saying it’s time to buy Bitcoin because the price will rise in the coming months, but my charts are showing no signs of the power of selling to disappear any time soon. Why is that? Could it be that my technical analysis is simply wrong? It’s possible. It could also mean that the Bitcoin hype and the people who believe in the prices rallying thanks to media, are collectively more powerful than technical traders.
Whatever the case might be you still have to consider the fact that new Bitcoins are still being mined every day and the miners are selling their coins for profit. The constant flow of new Bitcoins is slowly diluting the market and making Bitcoin cheaper either until the amount of Bitcoins reaches it’s maximum value or until the process of mining itself becomes too expensive for it to make sense mining them.