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.

EDIT
Please readers to don’t ask me how to set sierrachart indicators, i don’t have the time for this kind of support, feel free to post any requests directly on sierrachart support forum at the following url http://www.sierrachart.com/SupportBoard.php or study the documentation at http://www.sierrachart.com/index.php?l=doc/doc_Contents.php#OtherPages 

Said this i include here 2 screenshots with the settings i use for monthly vwap (click to enlarge)

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.

 

Yesterday there was the first serious profit taking by investors of this strong advance in price started in late September. In these cases it is very important that the average VWAP stop the fall of prices and in fact it worked perfectly despite the large volumes that occured at Bitstamp , about 50000 bitcoins .
At this point it is very important to stay above 270 dollars and possibly to react from here up to the second statistical deviation line of the VWAP located at 410 dollars,it would be a good top for November. It takes a lot of strength to go up further and it is very likely that we can drop during the next week down to $ 200, which i consider a very strong support and very important not to violate it.

For now I am waiting for further developments before taking a decision for my open trade , in the case of a break of $ 200 i will be practically forced to close the position to avoid to violate a fundamental rule of trading : do not to allow a profit to turn into a loss; it is very easy to fall in this mistake in a volatile market like this where winning trades can quickly turn into losses.

See you at the next update, and good trading .

It is clearly visible how much strength there is in this uptrend, the VWAP is the main support level and now it’s at 265$ and rising, the price breakout above 200$ has been important confirming the nature of the move as an explosive one, the target for this month is now at 420$ for bitstamp and i computed it as usual using actual volatility that is very close to the insane level seen in June 2011 top, when bitcoin moved from 50 cents to 32 usd in 2 months. I think that there is now enough buying activity to sustain this upmove and it will probably not repeat the crash happened last april, therefore i conclude that my initial target of 340$ will be cleared (it is already happenning right now at BTCchina where converting in usd price is at 416$).

For the bears, if there are any outside there:), the first bearish sign is a drop under 300$ then the penetration of the vwap under 265$ should confirm a reverse in the trend.

This is the first update for BTCchina exchange on my blog and i dedicate it to the growing Chinese community of investors that led the recent rally from 700 to 1300 CNY.
While profit taking in recent days has held up perfectly the VWAP support level the price drop has been an excellent buying opportunity. I believe that if prices remain above the VWAP we could see a further rise towards the second line of statistical deviation of the VWAP which is currently positioned at about 1650 CNY.

In the event that the VWAP level is broken to the downside, i believe that we will find a strong reaction from buyers around the level of 700 CNY that should hold up without problems and it would be an amazing buying opportunity for the medium term.

What we have just seen is nothing more than a profit-taking in a strong uptrend. As always, our reference is the VWAP line and for bistamp at the moment it passes at $ 147, say $ 150. I’m not worried as long as prices remain above this level, it is just volatility because of some investors cashing in profits by selling large quantities of bitcoins.

For those who want to buy it is always good to try close to the VWAP, particularly if it is trending higher like it is doing this month. For MtGox this month VWAP is at 160$, for btc-china it is at 1000 CNY.

This is the same analysis of the previous udpate but adapted to Bitstamp exchange, why? Well i’m getting more and more worried for the sort of MtGox exchange, the book of orders is drying out with less of 35k total bitcoins offered on the ask side. Investors are looking for other exchanges where to sell their bitcoins without any worries if they decide to withdraw their money. So from now on i’m going to publish market updates also for bitstamp exchange.

My MtGox mid and long term target of 167$ and 200$ correspond to 152$ and 185$ for bitstamp, levels that might be touched this or next month. VWAP at bistamp is at 122$, an interesting level where to buy in case of a retracement.

DISCLOSURE: I’ve already moved out my accumulated profits from MtGox, converting them in bitcoins, i’ll wait to sell them at the same price in usd when possible.

 

After the initial price shakeout down to 109.70$ sellers failed to take control of this market, from there a strong daily uptrend started and quickly broke the 131$ intermediate resistance, a level that I thought it was hard to pass in case of a mere technical rebound after a strong bearish bar; instead BTC/USD reached the 153$ today above the 148.9$ top of September that it’s now a  broken resistance.

At this point i think that 167$ will in any case provide some resistance to this trend and it should be finally reached before the end of this month.

Volume activity is increasing thanks also to china gaining momentum since 2 weeks, a nice surprise and in the event of chinese big players trying to get on the train the momentum could increase to really high levels and probably my target of $ 167 might be a little conservative.

Long term VWAP third deviation line it is currently at 200$, a more probable target in case of strong momentum.

In last post i was thinking about a shakeout rather than a true breakout towards lower prices, 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 activities of any sort). The volume average i’m plotting since the last major bottom of July worked out perfectly, the strong rebound from 109$ ended right now and it’s possible that a secondary reaction develops with a drop down to 125$ or so (testing again a static level i consider relevant).
Outlook for October is flat but any strength above 145$-150$ should carry bitcoin to my mid-term target of 165$-170$.