I think we are seeing the beginning of a  weekly strong  uptrend after a long accumulation phase spent at 5$, if the BTC/USD will drop under 5.5$ the picture might change a little, in this case we will see probably the bitcoin moving sideways in the 4.5$-5.5$ zone

Judging the last 6-7  bars of this weekly chart net volume i see a nice buying pressure and i’m not worried for my open trade, at the moment i’m still bullish probably till mid July. I added a 1 month target in the chart and i used full volatility in the calculation of this target, so i think that will be very hard to go above 10$ for mid July.

Here a brief explanation of how i derived the 10.2$ target:

1. compute natural logarithm of data increments
2. compute the mean for all data increment computed in step 1
3. compute rms (root mean square) of all data increments, squaring each data increment and sum all togheter, this process is simular to the calculation of standard deviation
4. compute target multiplying reference price for the exponential of RMS and square root of time (in terms of hours days weeks or months)

   V0 * e^+rms * sqrt (t)

   where t is time, rms the volatility and V0 the reference price

The reference price i used is 6.2$ but you could use also an average value of a moving average or another digital filter.
At the moment the rms value is 0.091497, time is 30 because using daily values i want to see a monthly target , so 30 days and you have:

6.20*exp(+0.091497*sqrt(30))=10.2338$ rounded to 10.2$

You can compute RMS using last 2-3 months for better estimation of Current Volatility, at the moment volatility level is about 80% of  the historical value, if you do the math you have a target of ~8.5$ instead of 10.2$ that i consider the maximum target for the next month. For long term you should use a more complex approach because this one doesn’t include the growth factor, it is suitable only for short term; why? well  because if the growth is very negative or positive with the pass of time it erodes the effect of volatility lowering or raising the target estimate.

At the moment the historical daily growth factor of BTC/USD is negative and it reminds me a typical bubble behaviour; when it goes up is just because of  Volatility Bursts.

This week range estimate is 4.96$-5.34$. The February 2012 bottom at 3.87$ is strong support. I think a base building period characterized by a slow upward drifting movement is nearly complete.  Given the very good resilience shown by BTC/USD since the drop from january top I think this means that a big rally is due but we lack an important element for now, volatility.

As i indicated in the below chart in the last 5 week we have had always positive net volume, this is good and tell us that investors are consistently buying this market.

I indicated also a 1 month target given current volatility level that is very low (about 15% of historical value), if bitcoin will move back to the volatility level shown in 2011 the next 30 days target is in the 8.3$ price zone but unlikely it will do it; would be great to touch 6.5$ by July.

I’m still long from 5.06$ and i think i’ll carry this trade for long term, considering also the very low volatility that nullify any short term trade opportunity.