In my last update i wrote about a potential down move after the breakdown of the ascending triangle (shown in the previous update) as usually happens when such triangle is broken to the downside.
The market rebounced to the trendline  to 6.6$ as i was expecting before dropping again and there i ‘ve thought for a while about liquidating my position but i didn’t do it, my mistake.

At this point i think that BTC/USD might drop again to 5$ or even 4.5$ in the next week, in the case of a clear drop under 4.5$ i’m forced to liquidate my position opened at 3.22$ 2 months ago; why? well you should never allow an unrealised profit to turn into a loss:)

After the breakdown of the trendline of the ascending triangle one should expect a down major move, i see this drop instead as a market glitch probably imputable to bitcoinica resolving some sort of hedging issue; that drop developed in a symmetrical triangle that has been broken slightly to the upside with price bouncing back to 6$-6.2$.

At the moment the mtgox book is unbalanced to the ask side, not much bullish and it will be difficult to go above 6.7$ today where the ascending trendline is now acting as resistance.

I tought 5.5$ was support but the BTC/USD touched 4.64$ during the spike, i think it might drop again to 5.2$ before resuming the uptrend.

In all this mess the daily net volume dropped consistently but the cumulative net volume since the 1.94$ low of November is positive with +127000 btc, the long term picture is still bullish; to give you an idea during the june 2011 top the all time high of the net volume was around +740000 btc then it fall to zero at november 1.94$ low after a protracted and severe downtrend.
It is interesting to observe that since the inception of MtGox exchange the cumulative net volume has never been negative confirming the underlying long-term bullish market.

As you can see in this 3 hour chart, BTC/USD is forming an ascending triangle, usually forms during a trend as a continuation pattern (if broken to the upside). The pattern contains at least two higher lows and two highs at the same price level. When these points are connected, the lines converge as they are extended and the ascending triangle takes shape.

Regardless of the nature of the pattern, continuation or reversal, the direction of the next major move can only be determined after a valid breakout of the two trendlines.

It is possible also to project a price target in case of a break out, applying to the breakout level the widest vertical distance of the triangle, in this case 1.5$ added to 7.2$ give 8.7$ as a target.

Well, i dont think we are going to do a huge downside breakout, i stay with 5.5$ as possible downside target in case of a breakdown of the ascending trendline. Net volume activity is good, the total cumulative value of the net volume since the beginning of this pattern is +20600 btc, it means that there are more buyers then sellers up to now or, if you prefer, a positive money flow.

This is a short term view of the last 50 days (the distance between two vertical dotted lines is one month), after the first strong up swing the market is fighting to go above 7.2 and to stay above 6$. I’m not going to keep my short term trade for the long haul yet because as i already said i want to see a confirmed buy signal even on the monthly chart.

As you can see in the chart even the net volume is dropping signaling that strong buying is going out of steam, i think that a drop to 5.5$ is possible before resuming the uptrend; in any case for who want to give a try i recommend to apply a stop loss under 5.5$ and sell at the resistance around 7$.

I remind to everyone that the “net volume” is a security’s uptick volume minus its downtick volume over a specified period. An indicator very similar to money flow but more accurate.