It’s been a rough month for Bitcoin and it doesn’t seem to be getting any better. With Mt.Gox halting withdrawals, and the massive network wide attack on the Bitcoin protocol media catalysts are giving strong downward signals with no sign of reprieve. The media would be tolerable but the technical factors seem to converging on the same downward movement.
Plotting resistance and supports for longterm PSAR reversal points it’s apparent this downtrend has largely been fueled by stacking resistances against lower and lower supports. At the same time the markets seem to be stalling at what can only be described as denial channels. These channels seem to be characterized by short term rallies, followed by narrowing sideways channels.
This same channel pattern can be observed in January movements. The overall market sentiment seems to be bearish however traders seem to be willing to risk going long for smaller and smaller potential gains till eventually gains hardly beat commission. At this point the channel seems to collapse at what I’ve been referring to as the end of the cycle.
Based on Fisher transformation transposed against polarized Stochastic Oscillator it seems that the high/low movements of the recent denial channel seem to be cycling faster than the previous January channel.
It is for this reason that I believe we will be seeing a crash to lower 500 supports relatively soon.
Typically I determine ‘major supports’ based on confluence of three methodologies in cryptocurrency markets; Fibonacci Retracements plotted outward from major pivots, 4 day equidistant channel bottoms, and PSAR reversals. From the above charts it appears all of these methods converge on somewhere between the 500-515 range. This range seems to be confirmed by previous crashes, excluding the outliers arising from the flash crash earlier this month.
The Take Home.
As we’ve been saying on the @Cryptoforexteam twitter channel, don’t sleep long without stops. Try to find long entries in the lower 500 range, and short entries in the upper 600 range. If you’re looking to trade on big swings avoid getting caught up in the signal noise of the denial channel.