Confirmation at last? BTC Update 23 May
Friday 23 May 2014
G'day! Well it's been a good week for bitcoin bulls, who have witnessed a second bump up from support that we spoke of in our last post. As I write, the market is hovering just below $540 (BitStamp) - which as regular readers will know, has become a key price point for this market.
Let's take a look at the price action on a chart:
As we'd been saying for a while now, it looked like a floor was being put in at around $450, and this is what provoked us to advise accumulation of bitcoin on an investment basis. Those who took our advice and purchased at support will currently be sitting on a 20% gain but while it is always possible that the market will burst straight through resistance at $540, we need to be clear that the prevailing market condition is a RANGE - and a new one at that. This means that there will be many sellers at this level; bears will be protecting existing short positions or even adding to them; bulls will be taking profit at known resistance. This combination of selling power has the potential to reverse order flow in a heart beat and send the market into reverse. And for this reason we would not advise any further buying at current levels, particularly on a short term basis. Further, short term traders should be looking to get flat or at least lighten up their position, while we see what happens next.
So, what's on the cards?
Well, if the market does pile through $540, $590 will be the next target. Active traders should be looking to take more profit here and investors will want to be ready to add to their position on a successful defence of $540 as Support.
If, on the other hand, the existing structure of the current range holds, $540 will turn the market back to the South and we'll need to see more before we can provide quality advice.
In the meantime, and as we said in our last post, market participants were looking for confirmation - on a weekly basis - that a bottom was in. Assuming the market can close out this week at, above or near where we are currently trading, the first building block of that confirmation will be in place.
We may yet, trade around these levels for a bit, but its currently looking like the market has finally escaped from the downtrend that has dominated the first half of 2014 - and this is good news indeed...
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