This night BTC/USD has managed to break above the VWAP, probably because having made a higher minimum at $700 it was already unbalanced to the upside and had enough energy to break the resistance, with now prices trading above the VWAP bitcoin is bullish again, at least in the short term.

The first key resistance is positioned at the first deviation line at 960 dollars. The RSI is overbought and may stay there for long if the market maintains a defined trend, now to get a clearer picture you have to spend time analyzing a 4 hours chart, or even daily. We’ll see it when i’ll publish a long-term update.

This night i’ve lost a clean buying opportunity at around 5 am (gmt+1 time) , unfortunately as a human being sometimes  i’ve to sleep.
Once rsi cross the thresold you can evalute if to take the trade or not by looking  VWAP lines as an estimation of price position.
Considering the high level of volatility the distance between the lines increased so in these cases you can consider an intermediate level between  VWAP and first deviation line  (not plotted on the attached chart but it is around $670) . So having good price and time indications it was wise to take the trade at around 680$ and it’s preferable to maximize the trade outcome closing it when a resistance is met (the vwap) and when rsi is overbought. Both conditions happened later and this trading opportunity has been a very clean one; very often these market movements are very smooth and natural.

Now BTC/USD is sliding with a reduced speed and it might do an higher low, probably above 650$. RSI indicates an oversold position and my gut feel tells me that a bottom is near the corner, probably 3-4 hours from now.

Eventually you can add bollinger bands and look for a bollinger band squeeze, it occurs when volatility falls to low levels and the bollinger bands narrow. Periods of low volatility are followed by periods of high volatility. Therefore, this behaviour can foreshadow a significant advance or decline. For example a new advance starts with a squeeze and subsequent break above the upper band. Instead a decline starts with a squeeze and break below the lower band.
The bollinger band squeeze indicator is available with Sierrachart, also with the free version. Have fun experimenting it!

Sellers are taking control of this market after the strong sell-off of this early morning (GMT time), at Bitstamp the market found a bottom at 542$, way below my support at around 700$. Since yesterday breakout of 950$ the market has been always below my short term VWAP, a sign that it is more bearish then bullish with every rebounce ending below VWAP as indicated on the attached chart on the left.

I’m planning to close this short term trade, at the moment i’ve a sell limit order at around $775 . For investors who prefer to hold the position open, it is important to close this week above 700$ and it is necessary next week to see a good reaction (with decent buying activity in terms of volume) to at least $900-$950.

The 50% retracement of this rally upswing (from $140 to $1160) is around 650$ and it is important because what the market do at the halfway level of a major rise or decline is crucial. The greater the move, the more important the 50% principle.
According to this Principle, if the BTC/USD , after all its fluctuations, can settle and hold above the halfway level, there’s a good chance that this end of the drop will rise, allowing the BTC/USD to test its prior high. But if the BTC/USD can’t settle above $650, then the odds are that it will sink further, taking it down to test or even break below its today 542$ low. In this event a bear market might start with a long term bottom around the $250-$300 price zone. As i said, next week will be important to see where this market will settle and hold.
Aniway, despite these considerations, and because at the moment i’m a bit uncertain of what will happen, i’m going to close my trade soon.

The chart you see left this post tell us that the short term tendency is still up, price is still above VWAP with positive netvolume so this is a bullish configuration and as long as it continues the sensible expectation is for higher prices.

I have shown in the graph another trade opportunity using both vwap indications and RSI oscillator (i use 8 for rsi period instead of the common used value of 14). When RSI enters overbought or oversold territory is always safe to close the trade if there is a decent profit on the table, don’t be greedy:)

Price range for today is $928 – $1080 at bitstamp.

Strong drop this morning after the China ban on Bitcoin, the market found support with a triple bottom at 840$ then reacted up to the first deviation line of today VWAP, the relative strength index oscillator worked very well giving a nice timing indication for entering and exiting a short term trade.

As long as price stays above today VWAP at 960$ i’m not much concerned for the bearish news impact on bitcoin, instead a drop under today low at 850$ should lead to an important test of my long term support at 700$ (weekly moving average).

Hourly chart at BTCchina, it is interesting to see that the market behaviour has been bearish all the way down since 1240$ top of yesterday. The volume activity also confirms the short term weakness, bearish volume (second pane in the attached chart). In the third pane there is the total volume, two volume spikes are visible when the market bottomed twice at 950$.

I think that now there could be a short term trade opportunity, for who want to try i recommend to buy now and sell half position at the first resistance , the VWAP at 1055$, and the rest of the position at the first deviation line, around 1150$. Stoploss  should be placed below the double bottom, at around 920$. Also the relative strength index oscillator confirm the trade because it is reversing to the upside from an oversold position.

UPDATE 10 HRS LATER
As you can see the signal worked and now we are at a resistance, the VWAP, and the RSI oscillator is overbought, both price and time indications that advise us to close the position in profit. This is a nice example of the intraday possibility of this market.

The bitcoin price reaction from the double bottom at $380 has been very bullish and i believe that we can consider this bottom an important one, at least in the short term. As i pointed out in the previous update the bottom has been very close to the VWAP, which is proving to be a good tool to follow the market when it is both trendy or sideway in a trading range.
I now think that prices will continue to rise until the resistance shown in the attached graph, near $ 1,000.
Weekly range for Bitstamp is 650$-1000$, for BTCchina 4000-6800 CNY and i think it might reach 8500 CNY as target at the end of this month or during December.

Psychologically the threshold of $ 1,000 is a nice goal to reach, as it was to reach in 2011 for the first time a dollar of value. When i started to follow the Bitcoin its value was 30 cents and  it seemed to me that we had reached an incredible milestone crossing one dollar at that time, it is amazing for me to watch bitcoin going to 1,000 dollars of value.

This is the daily chart of this month at BTCe exchange, Bitstamp unfortunately does not work since yesterday.
As you can see our VWAP average stopped once again falling prices, now it is a critical juncture and it is really important not to go under the VWAP otherwise BTC/USD could repeat the bearish pattern seen in April, this means that prices may drop down to 150 dollars where there is also the 200 days moving average.

If this bearish scenario will materialize it would be a tremendous buying opportunity since so far every test to break and go below the 200 days moving average failed.

For the first time i reveal one of the techniques that i use for  my intraday operativity on this market. This method consists of using a short term average, the VWAP that you already know but calculated using no more then one or two days on a 15-minute chart; togheter with the VWAP i use an oscillator, the Relative Strength Index or RSI.
Whenever prices are testing the VWAP and an oscillator such as RSI confirms the oversold condition you can place a trade with a stop loss below the first negative deviation of the VWAP, this will leave enough room for your trade to avoid stupid stoploss being taken. You can lock in profits as soon as prices break through the first or second upward deviation.

In the attached example you can see very well how this technique works, especially when there is a strong volatility like these days. The RSI period is 8 instead of the canonical 14 used by most, i prefer a faster setting to have less lag, the thresolds used are 30 and 70, common values for this oscillator. When the RSI is below 30 is oversold and above 70 overbought. To give you an idea if prices at bitstamp retest today VWAP at around 595$-600$ and the RSI is oversold below 30 and then returns above it, i open a long position with a stoploss under 450$ with a take profit at 725$ and/or 870$ (first and second deviation of our VWAP average). If the price is too far away from the VWAP when the RSI cross above the thresold at 30, confirming a long trade, i don’t buy and i simply look forward to the next trading opportunity.
So combining VWAP and RSI you are using both time and price dimensions with the effort to maximize your profits, cut your losses and drawdown as much as possible.

Prices continue to advance at a good pace, on the left there is a daily chart of Bitstamp exchange. The reaction from the VWAP has been strong and i think there is a possibility to reach a new target at about $ 475 where there is the second deviation of the VWAP that has now shifted upwards from $410 of the previous update up to $475. Even calculating with my method the price target for the end of the month i have about the same level of resistance at 475$ using a conservative volatility factor , instead using the historical volatility of the bitcoin (that is much higher), price target for this month is higher at about $ 525; hardly the prices at Bitstamp will exceed $ 525 this month.

The support zone is always the same and it goes from the VWAP ($ 295) down to the first negative deviation ($ 210), these two levels define the range of prices where i think you will see a very aggressive buying activity in case of a strong drop.