Bitcoin Price Analysis 5 Aug

Posted by: pesa_mic

August 5, 2015

Greek Stocks Tumble on 1st day Re-open

Shanghai’s Stock exchange poor run was overshadowed on Monday by Greek stocks, falling 23% below open. This was the first day of trading after a 1 month hiatus over EU-drama imposed capital controls. Banks stocks shed as much as 30%, despite strict controls on short selling and more measures to quell the market.

“the realization that an equity-eviscerating recapitalization (or bail-in) is now inevitable.”

The economic outlook isn’t any better either. Zerohedge expands in detail

Senate Inquiry Proposes Bitcoin be treated as ‘a national currency’

A Senate Economics References Committee in Australia reviewing digital currencies have called for a ‘foreign currency’ status; directing their comments at the Australian Tax Office. Effectively, bitcoin would cease to be subject to Goods and Service Tax by the ATO, lifting a heavy burden borne by startups innovating in this space. In a report, the committee received submissions from 48 individuals and groups such as Ripple Labs.

“The current position taken by the ATO is not working for anybody,” said Chris Mountford to Mashable on his submissions to the committee.

Fallen Mt. Gox CEO Mark Karpeles arrested in Tokyo

After losing 650,000 bitcoins valued at close to $400 million, Karpeled was arrested by Tokyo law enforcement on Saturday. Tokyo Metropolitan PD in a statement said “[Mark Karpeles] unjustly inflated the balance” by manipulating transaction records and falsifying data, a dubious $1million under his account. Karpeles denied accusations. More on this story on the New York Times

Bearish Forecasts for Gold XAU

Every Tom, Dick and Harry is almost certain Gold is heading lower,and not just in the short term. It is the first time since recorded history, that Hedge Funds are net short on this precious metal. An article on Zerohedge titled “Gold Sentiment Is Just Plain Ugly” cited one reason as

“Gold has not reacted as a safe haven as it should. Greece should have sent the price soaring but it did not.”

I found this interesting since Bitcoin did the exact opposite, going up 40% amidst Greek financial woes. It made me think about XBT (bitcoin) and XAU (gold) correlation in the past. Both have moved together since August last year as seen on this chart.

Not always however, at times, they’ve exhibited inverse correlation. From what I observed, they eventually resolve and move in the same direction. Which makes me wonder how long the current decoupling of prices will last.

“The chart showed they [XBT, XAU] are highly correlated. It showed their prices always return to agreement. Short-term opposite moves are negated and they move back into sync in their mutual downtrend.”

Bitcoin week of 29/07 to 5/08

This week bitcoin price action was dull, declining gradually from $ 298 on Tuesday, to a local bottom at $ 276. A double dip supported a gradual rise to $ 285 (as of writing). After a month and a half of an exciting run to $316, excitement in the bull has faltered, as hopes of finding a bottom echo in traders forums. So now, almost every trader is asking where is the bottom?

A better perspective of this week’s pattern can be seen on a larger timeframe. Just like the first small retracement, price is shaping up in a similar form – sell off from the steep rise up to $ 316. The relative strength indicator (oversold and overbought above and below upper/lower bands) moves in tandem with price. As long as RSI remains within the band (30, 70), it should model the first retracement and settle question of a ‘where price will find a bottom’. Mostly, it’s day traders who have to put up with these stresses, for longer term traders, there is plenty of room to find a bottom.

Depending on who you ask, locating this bottom is up to the unfolding technical patterns. For every technique there’s a name – the C&H (cup and handle) bull pennant and elliot wave 4

An elliott wave count from $ 213 up to $ 316 – (i), (ii), (iii), (iv), (v). ii and iv are retracements from the primary motive wave – Bullish motive in this case – and a retracement now looking for a bottom to reverse. A final wave v comes after in the general direction of wave i and iii. How far up v moves is upto the strength accompanying the final push.

Some basic guidelines observing Wave iv form

• Wave 4 retraces at least 23% of wave 3 but more often reaches a 38.2%
• Wave 4 does not often retrace Wave 3 by more than 50%
• Wave 4 always retraces less than 100% of Wave 3

“if this is indeed a wave 4, then volume will resume after market hits a suitable target. Volume naturally falls with price in correction mode”

The Cup with handle pattern theory also holds as the handle continues to form.Just like the ‘corrective’ wave form, it needs to find a bottom before advancing.

“After the C&H, looks like there’s a forming of a pennant, some more days to complete the triangle. What is needed for the kickstart you think?”

Finally, a potential bull pennant also identified on 1 day chart is yet to break out of its wedge shape at a final apex price. They are continuation patterns representing brief consolidations before resuming previous moves.Volume also declines as pennant extends, observed on chart above.

Forecast

Overall, i am still bullish to neutral and my targets for another leg up remain at $320 – $335. It is a high probability search for a bottom, for a rebound to retest $320 or even a bullish long-term trend line from the inception of Bitcoin, now acting as resistance.

Here, this line cuts above encircled price zone, testing it thrice. Zooming in at the circle

Price retraced at $320, right at the resistance line, tested twice before in January, March and 2 weeks ago. A rebound and retest of $330 is likely at this point, especially with multiple expectations of a reversal back up. It is now a matter of when and from where price will head up.

Contact: pesabitmic@gmail.com for inquiries on price forecasts.

Updated: 2015-08-05