Bitcoin Price In Downward Correction

The past six weeks’ bitcoin price rally has bolstered the market’s confidence. A technical price correction coincided with news about Greece, yesterday. Even in correction, the market is now more active and optimistic and we may expect additional rallying price waves when the current retracement has run its course.

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Bitcoin Price Analysis

Time of analysis: 10h45 UTC

Bitstamp 4-Hour Chart

Bitstamp 4-Hour Chart

From the analysis pages of xbt.social, earlier today:

A look at the longer timeframe 4-hour chart shows the rally to a wave high near $320 and 2000 CNY. The level of the high is slightly below $320 and corresponds to a 2.618 Fibonacci extension (obscured by chart text) projected from the very first wave of advance during the first half of June.

There are some technical factors that argue in favor of the wave being complete:

  1. From the base in early June to the weekend’s high, there are 7 distinct advancing waves – a signature of Bitcoin advance.
  2. The final advancing subwave (10-12 July) itself features 5 subwaves.
  3. The entire wave’s MACD value has exceeded a MACD value achieved in November 2014, and this “reverse” divergence now forces a price correction.

If the above assessment is correct then the price wave will now want to correct to the level of one of the previous subwave lows, such as $270 or $250.

Currently, the downward correction is still above the 1-day chart’s 200-period moving average, at $320 and 1770 CNY, and the market will grapple with this watershed level before letting go of it willingly.

There are some market participants who may view the break in advance as a failure and disappointment, but we know that it is only natural wave action: for every advance there must be a retracement – especially true, here, near the beginning of advance.

Note that the Oct/Nov 2013 rally had been an extended parabolic advance such as described in point 3, above. The current larger advance is progressing through the entire Bitcoin wave structure since inception, so there will be many advancing and corrective waves – and most likely not a single uninterrupted push such as we saw at the end of 2013.

The most important rule of trading is to play good defense, not great offense. Every day I assume every position I have is wrong. I know where my stop risk points are going to be. I do that so I can define my maximum possible draw down. – Paul Tudor Jones

Summary

Two scenarios are evident for price: either the correction will run shallow to $280 and then begin building the base of the next wave of advance, or price may correct deeper, below the 1-hour 200MA, and then consolidate. xbt.social favors the latter option since it fits with our analysis of longer term mean reversion playing out in the bitcoin price chart. For now, watch price action around $280 and $250 for short selling signals.

Bitfinex orderbook depth and Buy/Sell Volume:

 Bitstamp depth buysell volume 11h02 140715

Click here for the CCN.LA interactive price chart.

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Disclaimer

The writer trades Bitcoin. Trade and Investment is risky. CCN.LA accepts no liability for losses incurred as a result of anything written in this Bitcoin price analysis report.

Bitcoin price charts from TradingView.
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