Bitcoin recently made a strong upward move in which the price hit new highs on eight of eleven days spanning from October 29th to November 8, 2017, when it made a new all-time high of $7896.04. It has since then retraced as far down as $5460.62, at a support level just prior to when the up-move began.
The retrace is very likely a combination of profit taking, and the uncertainty of the news regarding the cancelling of the SegWit2x hardfork, a bitcoin upgrade. News of the canceled upgrade was announced on November 8th, and coincides precisely with the downward price move.
The uptrend line formed by the current price action that bitcoin has been recently exhibiting began back on September 15, 2017 at $2966.661 (refer to the purple trendline on the daily price chart below), has been broken through. The last time that bitcoin experienced such a downward price move was in the beginning of last September.
The end of the downward move was signaled by two consecutive up-bars on the daily chart (circled below). This pattern seems to work well as an indicator of upward price tendency.
Notice the daily chart below. Of the eight circled aforementioned patterns, six of them result in price increasing before a significant price drop takes place.
Chart #1: Bitcoin Daily
Reference #1: Circled 2-consecutive daily upbars pattern
A more in-depth analysis exposes another pattern that gives clues to upward price movement. In the bitcoin daily chart above, the second circled pattern from the right is zoomed-in on in the chart below.
Chart #2: Reference #1 Pattern Zoom-in
Here in Chart #2 we go from a daily chart, to a 5-minute chart. What can be clearly seen here in the area just prior to the run up on October 29th, is the spikes in volume that coincide with upward movements in price. Although there is some increase in volume when a downward movement takes place, the increase in volume is not as pronounced. The inverse can be seen in chart #3 below.
Chart #3: Downward Move After November 8th
Chart #3 shows the downward price action that commenced on November 9th. Once the downward move begins, volume spikes when price moves downward, and tapers off when price recovers. The very last volume spike shows indication that there is now also high volume for upward price movement, and therefore interest by traders on this price bounce. This could be a sign of consolidation.
Bitcoin has been extremely resilient, and is on a very strong overall uptrend. Until otherwise indicated, following the uptrend is the smart play. The savvy intraday trader should look for 2-consecutive upbars on the daily chart, along with volume patterns that indicate stronger interest to the upside as described earlier, then start trading from the long-side with tight stops. The long-term investor that already has an existing position should hold-out, and consider adding to the position as this pattern begins to show itself.
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As the popularity of cryptocurrencies such as Bitcoin begins to level up with investments made in metals such as Gold, together they have both made significant advantages for investors who have taken a leap to invest in them.
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What is blockchain technology?
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ur welcome pic.twitter.com/e2KF57KLxb
— Elon Musk (@elonmusk) February 4, 2021
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Hong Kong, Hong Kong, 25th January, 2021, // ChainWire //
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