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$

Initially i thought about a break down of the 2$ big support, but BTC/USD after a huge selling climax bar reacted to 2.47$, i now have to reassess my view giving 2.8$ as next target. Usually when a big downside bar develops its starting point become resistance and in this case the resistance is the 2.8$-3$ zone.

Only with a  genuine upside breakout of the Ross Hook at  the 3.8$ level the overall bearish scenario will change in favour of a bullish one. I’ll check if the BTC/USD will form again a 1-2-3 formation and possibly a new Ross Hook  for a lower entry point  (compared to the old one located at ~3.8$) where to go long on the market.

 

On October 18, 2011 i wrote “…I can speculate to project a new bottom and i’ve a new support at 1.50$ to be reached by the end of november….”, well i think that BTC/USD is on track to that target , i think that the 2$ bottom will not hold and bitcoin will soon test the 1.5$-1.7$ zone.

Why? BTC/USD  failed to pass through the Ross Hook at 3.8$ and resumed the downtrend. It is true that the weekly moving average is slowing and flattening but this process will require a couple of weeks to stabilize and eventually reverse to the upside, in the meantime the selling pressure will probably bring the bitcoin under 2$.

 

After eight days i checked the daily forecast made with an Arima model published on my latest post. I expect a modest rise in the next few days, probably not above the weekly moving average that at the moment is at 4.8$

Compared to the forecast the BTC/USD fell more then expected partially due to a large player that dumped 30k bitcoins on 7 October.

With this update i’d like to introduce a powerful concept, the “Ross Hook”. invented by Joe Ross, a trader and investor of over 50 years. 
Ok  but what is the ross hook? Well, the Ross Hook is a technical formation that occurs in trending markets where there is a failure of the market to make a new high in an uptrend or a new low in a downtrend. The Ross Hook must occur after a 1-2-3 trend reversal formation has taken place. As you can see on this 4h chart of btc/usd at MtGox in the last 5 days a 1-2-3 pattern formed with a first breakout labeled “RH” or Ross Hook.
Here the btc/usd failed to make a new low at the point “3” on the chart, then it has done a first strong breakout of point “2”, the first istance that failed to make a new high created the Ross Hook (labeled “RH” on the chart). If the market will go above the Ross Hook a trader might try to open a trade, in this case above ~7.3$; a breakout of 7.3$ would imply a temporary reverse in the short term.

For who is interested in this approach i recommend the book “Trading the Ross Hook”

Often the BTC/USD follow a 24 days cycle (12 days up movement  followed by 12 days down movement), during the strong rise of april-june instead it followed a 12 days full cycle (6 up, 6 down). I dunno why, perhaps it’s tied to the ~12 days period of bitcoin difficulty adjustment. So far is working very well and as you can see in the left chart now a reverse of the cycle is due.

The fact that cycles exist does not imply that they exist all the time. Cycles come and goand external events sometimes dominate and obscure existing cycles. Experience shows that cycles useful for trading are present only about 15 to 30 percent of the time. This corresponds remarkably with J.M. Hurst’s statement that “23% of all price motion is oscillatory in nature and semi-predictable.” It is analogous to the problem of the trend follower who finds that the markets “trend” only a small percentage of the time.

I strongly recommend J.M Hurst book “The Profit Magic of transaction Timing”

 

 

BTC/USD failed to breakout above 12$ and if it is going to stay above 10.50$ then a new attempt  to attack the 12$ resistance is possible.
The inverse fisher Rsi oscillator is still overbought and so the short term rally is still intact.

About the NY conference, i think there will be a time lag of  2-3 weeks before some effect on prices show up. It was a good event and the presenters did a great job, we need many conferences like this in the upcoming months if we want to see a bullish autumn.

I already explained in the past that  once an ascending triangle breakout occurs the most common price target is generally set to be equal to the entry price plus the vertical height of the triangle, in this case 12$ plus ~5$ equal 17$.

Looking the 4 hours chart here on the left i expect the breakout to occur in the next 48-72 hours; if not then the outlook provided by my elliot wave software will be right again, this outlook has always been bearish on the longer time frames after the 32$ top in june (more info to come on the next long term update).

At the moment I am not very impressed by recent bullish action since it was expected after a huge sell off, it is a normal bounce. I’m curious to see if the bitcoin conference currently held in NY will attract new investors so to ignite a new strong rally in september, or at least to break in the short term that ascending triangle pattern.

BTC/USD after a 50% retracement to the 9$ support rebounced nicely up to the resistance at 12$. As indicated in the chart i’ve my Alma weekly moving average at 11.93$, in the last six weeks the BTC/USD has never been able to stay above it, thus this average is showing to be a reliable indicator for the long term. A breakout of this average could be the first warning for a long term reverse of the actual downtrend.

Finally, I should like to say a word or two on Tradehill, this exchange was born as a valid alternative to MtGox but so far it failed to meet expectations. Why? well because if you look the daily volume activity it is not growing, always beetween 1000 and 2000 bitcoins exchanged every day on average; numbers never lie.

Mtgox is and will remain the leading exchange for a long time ahead.

BTC/USD as usual is very volatile when large bitcoin holders enter/exit the market. In around 72 hours it moved from 5.75$ to 12$, the break out of my today range estimate (above 9-9.5$) is good but the overall long term picture is still bearish until the market show me the contrary. Looking my previous post, the weekly moving average is at 12$ and it will not be easy to pass it.

As i said in a couple of old posts the 9$ was my long term reference support, the fact that it quickly recovered that support could let me think that the recent drop down 9$ was only a selling climax. BTC/USD should stay above 9$ for the next 24-48 hours, possibly with a quick test of 7.5$ ; lower bound of today range estimate is at 6.2$ but i remain optimistic that the 7.5-9$ zone will hold.

This is a short term view of the last 2 weeks (the distance between two vertical dotted lines is 24 hours), the fibonacci retracement of ~62% at 13.3$ is working, after a brief test few hours ago the BTC/USD bounced to 13.7$, it is important to stay above it and i think the short term trend will reverse today with a new sequence of higher highs and lows. I’ll evalute to close the trade under the 13.3$ support but i remain confident that it will hold.