XBT/USD is slowly retracing back in the lower part of the price channel. This price channel is computed using a fitting function that highly smooth the data and the deviation lines are computed using the average true range, overall it is a bit different from the other approach used by me: VWAP and its deviation lines.
The color of the midpoint channel line represents the slope, white it means the tendency is flat, red and green for a bearish or bullish tendency.

I think that this market is now flat with a short term bearish tendency that should end with a new low at or above $575, any weakness below it and especially below the recent bottom at ~$550 would be bearish IMO.

In my last update I had suggested a decline in prices in the $520-$580 price zone and it duly happened:) why? Well sometimes i forget that this market is very sensible to news with a strong tendency to overreact.  It is enough a modest bearish news that the majority of the trading community lose control to their emotions and cannot make up their own minds, feel free to call it the sheep effect:)

As you can see in the attached two hours chart now XBT/USD is bearish in the short term with the weekly VWAP acting as resistance at about $600.
The target for the next week is to move again above VWAP to regain a bullish position, while an immediate further correction below $520 would be bad IMO with some bearish implication also for the long term trend.

To conclude, i expect a rebounce up to $600 for the next 72 hours.

Over the past three weeks the market rallied and almost all of the indicators I follow rallied with it but it is not enough for me, i want to see XBT/USD going above the previous top of $710 and so far the last top has been done at $680.  A 10% correction happened but the short term VWAP (computed using last 7 days) is providing support, in case of a break i see the $550-$580 price zone as a strong one which should prevent any attempts from sellers to move this market further down.

Bitcoin should move up further from here considering that the RSI oscillator is now oversold and because the price is still above the VWAP i think that an healthy correction just ended, XBT/USD should go up towards its first important test: to break through the $710 february’s price top.

As i said recently, a congestion occurs when four consecutive bars open or close within the range of a “measuring bar”. A “measuring bar” becomes such when its price range contains the opens or closes of at least three of four subsequent price bars,  I consider the daily bar of last 27 April the measuring bar with the range from $430 to $460.

We can say that it is a congestion because we have been inside the measuring bar for 18 daily bars, more then 20 bars it is a Trading Range with a breakout usually occurring before the thirtieth bar.

I expect to see a breakout in the next two weeks also because of what i wrote about the length of the correction started in December ’13; I think that this congestion will not last more then 30 days in a volatile market like this. Top of the congestion range is also the one year VWAP now at $460.

If XBT/USD will break below the congestion range, i still think that the $370-$390 price zone will provide some support.

 

Since my last short term update XBT/USD topped at ~$460 and retraced back to the weekly VWAP, the RSI oscillator is oversold now so i’ve to conclude that there will be a new upswing from here.
Well when it is too easy there is always something wrong, i think there could be a further drop to the first support line at $430 before we see any upside; don’t forget that $427 is also the first negative deviation line of the 2 month VWAP, i think that for the next days this price zone should hold (around $425-$430).

For all the readers of this blog that likes to do short term trades i recommend to watch out that support area i mentioned before with the idea to close at or above $440, in any case it’s better to use a tight take profit because of the overall picture not yet bullish.
The stoploss should be tight as well, if this market breaks below $420 better to quit the position or open a short position up to the next support at $375-380.

This is a four hours chart using BitFinex, i’ve decided to move there but it’s a temporary decision, i’m not particularly ecstatic about an exchange that used the stolen code of bitcoinica as a starting point. I decided to ignore hitbtc because they are blatantly faking volume activity since mid april; an unfair practice that i really hate. I’m currently exploring also ItBit, the Singapore based exchange, it could be my next choice.

XBT/USD is showing some sign of life after it moved above the weekly VWAP, it could be the first step for a long term reversal as long as it stays above $440. I’ve noticed that also the weekly net volume recovered from a very bearish situation back to neutrality and the two months VWAP is not so far, currently at $480.

Many investors and traders are waiting a further drop below $400 and possibly lower, a couple of weeks ago i was waiting a drop to $300 but the market stopped at $340, at this point I’m not so sure that this market will satisfy us with a further drop considering also what i’ve said in my previous update about the length of this correction started last December. I smell the possibility of a market upmove coming soon and against the expectations of all with the effect of surprising everyone.

The recent sell off has brought the bitcoin into some notable short term support that I believe deserves attention. The top chart above shows the BTC/USD coming into support that is defined by the second deviation line of VWAP, computed using only last 7 days of data for a very short term indication.
The bottom pane of the chart shows the RSI in oversold territory but its average is higher because of the 5k bitcoins dump just happened at bitstamp.
It would appear to me that strong support in the near term, comes in around the $500-$520 price zone while resistance is above the VWAP, now at $590.

I don’t expect to see bullishness soon, i’m still looking for a long term bottom around $420.

The BTC/USD at bitstamp exchange has been trying to bottom, but has been blocked in a trading range since 7 January ’14. There have been several attempts to move above the short term VWAP without success, every time my average halted the price advance; this means we have an accurate dynamic level that help us to understand when to enter this market: at the breakout of that level (now located at $828).

I think that if the weakness will continue in the coming days, we could see a low near $ 785, where there is the first negative deviation  line. RSI average is close to oversold, indicating that a bottom is near.

 

Bitinstant CEO Charlie Shrem has been arrested today in New York and charged with conspiring to commit money laundering. Well i think that we have just seen a strong shakeout after a bearish news for bitcoin (actually i consider it a positive news, i don’t like to see bitcoin associated to criminal like money laundering) with a sudden move down to the second deviation line of VWAP at 750 dollars.

I don’t think this news is enough to sink this market to much lower price levels, the congestion phase should continue with the short term VWAP moving average acting as resistance, now at ~$830.

I pointed out in the attached chart several occasions where BTC/USD failed to move above my reference moving average confirming the weakness of this market. The Net Volume activity was positive but turned negative after the news came out this morning.

We are in a price congestion and as long as the market stays inside my trading rage of $760-$920 the considerations i’ve made in my previous update are still valid and don’t forget that good resilience against bad news is always a positive sign.

This is a four hours chart of this month, it is visibile a descending triangle pattern forming up. Well i’ve read here and there about this pattern with lots of people worried about it, but usually this is a dangerous pattern when there is a clear downtrend and it’s not the case here, we are in an uptrend since last 18 December.
There are instances when descending triangles form as reversal patterns at the end of an uptrend, but they are typically continuation patterns.

Regardless of where they form, descending triangles can be considered bearish patterns that indicate distribution but, at the moment, i don’t see a strong negative lecture of my daily “net volume” indicator, instead it is improving.
Second thing to consider is that this month we have had many positive news, also today the French Senate hearing on bitcoin has been positive, in my opinion.

This triangle is going to complete itself before next 20 January, before this date it will break somewhere below my strong support at $785 (where there is also the daily VWAP) or above the descending trendline that defines the triangle, for the next days around $860.
Both levels are near vwap deviation lines of the short term 4 hours chart here attached.

As usual, I’m open to questions and comments, thank you.

This is the chart from the $382 low of December 18, 2013; the VWAP is calculated starting from that bottom. It’s interesting to see how the RSI buy signal of December 22  is to be interpreted as a nice buy signal because the price was above the VWAP and it was forming an higher low.
The bearish signal of yesterday from $734 came after an higher high at $765 compared to the previous High at $720, i can conclude that the short term the trend is up but not so strong because of weak buying volume activity.

However i’m not much convinced to open long positions right now because I don’t see a strong positive rate for the volume activity, the net volume improved a bit and it’s almost neutral, a sign that now there is more balance between buyers and sellers, but we are certainly not at the levels seen during the strong uptrend of last November. I’m not saying that it’s forbidden to trade in the short term but you have to be extra cautious opening long positions when the volume is not supporting too much the rise.

 

Thanks for voting, but 62% interested to see updates on altcoins is not enough for me, if it would have been 80%-90% i’d have not hesitated to add updates about big altcoins like Litecoin or Namecoin. Sorry guys but for now i stay focused on Bitcoin only.