This week, bullish sentiments across the market have almost hit fever pitch. Traders are all watching the same pattern unfold, since November 2015, a high probability upper breakout.
Raoul Paul, ex- Goldman sachs hedge fund manager tweeted this chart above saying
“On the subject of Bitcoin, this wedge offers a high probability of a big upside breakout soon.”
Because almost everyone and their mothers are waiting this, caution is advisable as the market likes to pull the unexpected. I am thinking of July – August last year, when traders were anxious for a cup and handle pattern to retrace a handle and break to the upside, only for it not to materialize, but instead continue down to a new low $198, before trending up to November’s 2015 $502 high.
This week, the price of bitcoin fell to $408 from its $450 high last week. Since February 24, it has gradually crept up towards $440 resistance, but failed to break. Momentumnow seems to have faltered, possiblly heading lower before a second attempt. As of writing this, price is $432 on Bitstamp.
$465 is a strong resistance level to beat on any concerted attempt at breaking up. Since falling off the edge to a low $352 on January 15, $360 has held as a support,ultimately as a base for a relaunch to lost $440 highs. Price has been trading within a range $420 – $440 since February 20. It is decisive, as a failure to break $440 may lead to a retest of low $400, upto $385.
Above is a triangle that has been active since November 2015. From elliott wave theory, the triangle commonly occurs at wave 4, before a final wave 5 up. It converges to a break out point in an a,b,c,d,e fashion.
“Looks like a triangle is shaping up before we resume the uptrend to find a C wave top of the B wave of the full correction since the $1163 high. However, if we break the ~$380 level, BTC will likely resume the downtrend straightaway”
So far, its respected the upper and lower sloping trendlines. Ideally, the next retracement should form a higher low $352 at C. E is valid to the C wave low ($352.50 but no less). Since trader set ups are set for these levels to be respected, a failure of expected support is reasonable, to trip stops set up for a continuation of the trend within this triangle.
23.6% fibonacci level is fickle territory, on peak to peak fib extension from $198 low in August 2015 to $502 high in November same year. On this chart above, it is clear this level is pushing down on price at every attempt to break above it. If this second attempt fails, it is reasonable to expect a retracement to the 38.2% level at $400, with an allowance to $385 for offshoots to trigger stops.
Japanese Legislators Explore Bitcoin
Last week, Nikkei reported Japanese regulators were considering treating bitcoin as real currency. While addressing the Finance Minister in a house budgetary committee, Liberal Democratic Party member Tsukasa Akimoto, raised the issue of exempting bitcoin from an 8% consumption tax.
“Can’t you consider not imposing consumption tax on bitcoins in line with the international trend?”
According to Nikkei, Japan’s Financial Services Agency is set to submit to the current lower house of its legislature session its first-ever plan for regulating virtual currencies. It seems, the country is worried for its competitiveness vs other industrialized nations. Today, purchasing bitcoin is subject to an 8% consumption tax.
Texas Hedge Fund Manager is buying bitcoin
The US subprime mortgage crisis caught many investors off guard, but, also made some money experts famous for forecasting the impending collapse. Mark Hart was one of the few who called it right, and now, he is bullish on bitcoin according to Zerohedge. As an expert on China, he expects continued Yuan devaluation to prop up the price of BTC, as a route for evading capital control.
Speaking to Raoul Paul, an ex-goldman hedge fund manager who now hosts global financial markets experts on his show, Real Vision TV, Hart said
“Bitcoin is interesting to me as a route for capital flight. I am not opining on the long-term viability of bitcoin – I do think there is something there – but I am long bitcoin specifically to capture capital flight from China.”
Tip TV Finance show bullish on bitcoin, $697
In their most recent episode, Zak Mir and Bill Hubard talk to Charlie Morris who opined he is more bullish on bitcoin than gold, and is expecting it to edge higher upto $697. He was however, dismissive of bitcoin bearing any correlation with bitcoin, citing its small $6 million market cap vs gold’s $1 trillion. Regardless, it is great for bitcoin to get featured on mainstream trading circles, and it’s only a matter of time before BTC catches up with XAU.
Weekly Price Forecast
This week I am cautious on another leg up, as I am expect a retracement to a solid base for a proper final attempt at breaking out of the triangle. I am bearish for the near short term.
For the bullish count to remain active, $385, and at worst $352 should hold on the lower rising slope line. Beyond this retracement, I am bullish for the next 2 months. My targets are $650 minimum and possibly up to $800.