In the last days XBT/USD started to break below the long term VWAP (~$445) and if it makes further downside progress the breakout will become very obvious.
It would probably be followed by a move down to the old April 2013 Top at $266 confirming the giant descending triangle that it is forming.

Such a breakdown would be very bearish IF accompanied by a dropping network difficulty as happened in 2011 during the bear market.

As you can see in the attached chart that on the two previous tests of the VWAP (December bottom at 382 and february bottom at $400) the market reacted strongly and quickly instead this time it is spending too much time around the same support, this is an indication that probably XBT/USD is going to break below it.

In case of a confirmed break below $440 for this week support level should be around $330-$350, i don’t think that XBT/USD will go straight to 266$.

So far I have been talking about bearish potential. There is still a chance (probably 20%-30%) that this potential will not be realized and that new bull market highs lie ahead if XBT/USD stays above long term VWAP. In case of a reaction from here first resistances are at $550-$580.

 

After failing to stay above my weekly moving average ($616) and VWAP computed using last 2 months ($611) the XBT/USD moved back to a short term downtrend with a lower top at $631 (12 March) after the previous one of $710 (3 March); supports are now at $534 and $457 as indicated in the attached chart.

RSI is very low, very oversold and at this point i’d like to see a decent reaction at least up to the VWAP at 610 dollars but i’m not so sure about it because of the overall bearish outlook on a weekly basis. I think that the market might break below the 541$ recent low because of a big descending triangle that it is forming on the weekly chart, and moves all the way down to the $440-$450 price zone where i think strong buyers will come back for a new buying opportunity.

 

Bearish Scenario
If this market decides to move well below my long term $440 support I think it will spend there the right amount of time required to scare weak investors, forcing them to sell their bitcoins to long term experienced investors.
Where? The final bottom should be probably above the April 2013 top at $266 but as long as XBT/USD stays above my $440 long term VWAP support this bearish scenario remains only an hypothesis.

Not much happened since my last update ten days ago, the market volatility dropped a bit and XBT/USD is struggling to stay above 600 dollars. It is a characteristic of this market because it is composed by amateur investors they don’t have the patience to hold and after a while if nothing  happens they start to sell for eventually rebuying later. Aniway I summarize the situation as follows:

Bullish aspects:

• Price above long term VWAP (now at $440)
• Slope of ALMA moving average slightly positive

Bearish aspects:

• Weak buying volume activity
• Ratio between buyers and sellers is negative, and it has been so since December $1200 top
• Market reactions to good news has been sluggish since january $1000 top on zynga and facebook news, this is not bullish, investors are reluctant to buy on good news.

Conclusion
I think that this market will need time to absorb the “huge confidence hit” because of MtGox fiasco but as long as it stays above the one year VWAP ($440) i’m not worried for a possible bear market coming. For who has been ruined by MtGox and its phenomenal CEO and wants to enter again in this market there are two possible strategies:

1. buy now 100% of your position
2. buy now 50% and the remaining 50% if bitcoin retest again my long term vwap around $450

Stoploss for both strategies could be a weak market going under $350-$400 for a prolonged period of time and a dropping network difficulty (currently on a strong rise).

Since my last update XBT/USD showed strength above $600 this means that the short term bearish trend is almost over but I need to see the upvolume/downvolume ratio computed on a 3 days chart becoming positive before opening a long term position.

Another positive aspect is that the ALMA moving average slope is now positive, an important bullish sign.  For an investor who wants to play very safe with their money i recommend to wait a confirmed bullish volume activity because, as I said before,  the up/down volume ratio is still negative; why? Well because it’s not enough a strong and quick spike up to $710 to erase weeks of weak market performance.

The intentions of the market to goes up must be confirmed with solid buying from investors but for who wants to try to anticipate the market i recommend to place a buy order in the $600-$620 price zone, in the short term this market should found support there, above the 3 days ALMA moving average now at $605.