I was again waiting a move to 5$ but the bitcoin reacted to 5.8$ after a situation of oversold rsi oscillator and negative net volume indicating exhaustion of the previous downswing.

In the same bar it touched 5.8$ and then a shakedown took place carrying the bitcoin to 5.3$ with considerable overall volume (~160000 btc), i’ll consider this as a reference bottom for the short term. Resistance for today and probably the upcoming weekend around 6.4$

I was expecting a drop to 5$ but instead the bitcoin jumped quickly to 6$, since then it slowly dropped back to 5.5$-5.7$. I still think it could develop a bottom at 5$ and then rebound quickly back to the 5.5$-6.0$ zone.

I attached here a 4 hour chart, it is visible the rsi oscillator that is in oversold territory with negative net volume. This let me think that a quick bottom might develop followed by a strong bounce probably to retest the resistance levels at 6-6.2$

In the last three weeks we have had a negative outflow of money warning us that sellers are selling good quantities of bitcoin after it has recently spiked in price from 2$ to 7$ with a great deal of  capital appreciation. Despite this selling pressure with overall high volume the prices are still well above the recent low of november at 1.94$; i interpret this behaviour as bullish for long term.

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.

This is a short term view of the last 45 days (the distance between two vertical dotted lines is a week), after the first up swing the market retraced down to the 2$ level and it’s rebouncing from there approaching to what i call the death zone represented by the 7/8 of the distance measured from the low point to the high point of the reference swing. In this case it would be the area around 3.5-3.6$.

As i said in the past i call it the Death Zone because this is where many promising new swings die an early death without going above the reference top.
I’m not going to buy here because i publish only relatively safe trades here, but for who want to give a try i recommend to apply a tight stop loss under 2.65$ and a profit target at 3.5$