Bitcoin
Bitcoin Market Technical Analysis: November 16, 2017
The recent price drop by bitcoin from its all-time high of $7896.04 on November 8, 2017 to $5460.62 on November 12th caused a major “shakeout.” Traders either elected to take profits, had their trailing stops activated, or, for those unfortunate traders that were holding out-of-the-money positions and could no longer bear any further draw-down, took their losses.
Many cryptocurrency media pundits characterized Bitcoin as unstable with violent price swings. Some even announced the “bursting of the bubble.”
Despite what the pundits say, Bitcoin continues to prove its resilience.
Chart #1 below shows that it has almost made a complete recovery after hitting the low of the “violent” price swing only five days ago.
For those pundits that that haven’t bothered to look at a price chart, it can clearly be seen on chart #1 that a similar price drop took place on September 2, 2017 from a high of $5098, to a low of $3250 on September 15th(shown in the blue shaded area). This price drop accounted for $1848, or 36%. The recent price drop that Bitcoin is recovering from now measured $2436, or 30%.
And yet here Bitcoin is, not far from making new all-time highs again.
Chart #1: Bitcoin Daily
From a technical analysis perspective there are a few observations that are worth noting.
First, in our last analysis of Bitcoin dated November 13th, we noted a pattern of two consecutive upbars on a daily chart that consistently signals an upcoming upward price movement. The pointer on Chart #1 shows the pattern emerging immediately following Bitcoins price drop. The close of the second upbar was the ideal place to enter long. So far, the pattern has held.
A second observation is that the price action is right back on the uptrend that it was on prior to the price drop (shown by the purple trend line).
A third observation is that price has reached a resistance level (shown by the blue horizontal line).
Chart #2 below shows the resistance points going back to November 7th.
Chart #2: 5-Minute Bitcoin
On the 5-minute chart it can be clearly seen that a breakout is in progress. If price makes a new high, for those traders that are not already holding long positions, the next price dip would be ideal to enter long.
The last observation is one of caution. The one thing that this setup is missing is volume.
The 5-minute chart shows volume diminishing as price increases. Keep a close eye on volume. If Bitcoin makes a new all-time high without seeing a spike in volume, this may be indicative of lack of interest by traders/investors.
This may cause the price recovery to fizzle out.
A protective stop-loss should be place no lower than the lowest daily close of the price drop (as shown by the red horizontal line on chart #1), and adjusted to follow as price increases.
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