Posted by: pesa_mic
April 29, 2015
Are we expecting double digit bitcoin prices?
First of all, here is where prices are on a 1 year outlook
This week, market price of bitcoin played out like we expected – a slight uptrend, that encountered our target resistance at $240 before going down. Early signs of this uptrend unfolded as an ascending triangle, breaking out to the upside. In the process, it pierced right through 30, 50, 100 and 200 day EMAs on 2 Hourly charts. Almost always, such a break usually signals a confirmed trend. This time, however, that was not the case.
A false breakout turned bearish in what closely resembled a pattern from mid – March. Back then, prices shot up to$271, only to go back down. Here are the two incidences:
If you have been following our bitcoin price analysis, we expected this move – similar to previous attempts (encircled) and failure to break above moving averages. Because we are in a larger EW bearish motive wave (grey arrow), corrective waves (encircled) are normal retracements from the major trend. At times, they take different forms (flat, zig zag, contracted) but they are always a breather before further drops. Last week’s move up from $216 to $238. was one of such corrective waves.
Sunday’s drop to $213 low is part of a smaller fractal corrective, culminating in current prices $221.
Drawing fibonacci fans from the low at $166 to the highest top at $303 – to project resistance points. All broken while drifting along resistance but enough selling pressure to break.
A channel runs from top-down limiting price action within a range. Mind you, this is a short term channel, on a higher timeframe, prices are within a larger channel. Channels are great for following trends, notice the upper and lower bounds.
Comparing stochastic RSIs from previous lows over this unfolding bear market, we see a higher probability of a trend down. In light of consecutive drops lower since last month’s retest of $ 303, followed by corrective waves, the next move is likely down.
Bitcoin Market Sidenote
Yesterday, prices at BTC-e caught the market by surprise, moving up to an unexpected $269 high – way above ALL other exchanges by more than $30. It is not the first time questions over its ownership, practices, operations and safety of bitcoin holdings have been the subject of speculation. Last year in August, another flash crash on this exchange dropped prices below $ 400.
While prices are not exactly the same on all exchanges, they tend to have a reasonable margin, considering exchange costs between different sovereign currencies – CNY/USD/EUR. This one however, was blatantly suspect.
Speculation on traders’ forum suggest market manipulation. The timing of this high coincides with EW analysts top projections of a corrective, an initial target of $230. With this in mind, it the spike may have been margin shorts covering or stop losses set off by higher bids – way higher than projections. Who knows?
Due to large volumes on Chinese exchanges ( 32% market share), it has traditionally led market prices, with technical chart analysts basing price levels on Chinese data.
Bitcoin Price Forecast this Week
I am expecting lower prices in the coming week, despite this spike of prices BTC-e. The bear market is still in force. Just like last week, $210 – $200 level will be key to watch. It has been tested several times – the most recent $213, in a sideways consolidation for a while. Significant support levels are not easily broken, and at times, it takes several attempts to break past a crucial support. When this level breaks, some panic might ensue and set off lower prices.
One reason why $185 is a real possibility, is this price action within a larger channel tracing back to the last decent bull run in May – high $ 693. After testing the top followed by failure to break out upwards, indicators point to a retest of the lower channel support. Sloping down from last year, it targets $160 halfway through, and $30 touching base. Combined with other indicators looking bearish, it seems a real possibility.
The market is still hunting for a bottom – one of many possible – a double, triple or V channel bottom – or more. On a larger outlook of prices from 2008, we could be in a wave 4 retracement of an extended Wave 3 move up that started at $4 around Feb ’12. These are higher fractal waves to get a picture of yearly prices. Wave 4s can go as low as wave IV – one lower fractal, meaning, double digit prices wouldn’t be surprising at all.
“A 94% retracement of the whole $4-$1163 move on Bitstamp would bring us to circa $73.” – edboard10
What is important now is to track price as it unfolds. Bitcoin is relatively young (less than 7 years old); grand cycles are not clear given this short history. That said, an open mind to unprecedented price levels is advised.