Bitcoin Market Analysis: Week October 13-19

In last weeks update we were expecting a small rebound once the sell wall at $300 by the Bearwhale was finally eliminated. This turned out to be the perfect scenario and there were two attempts at a new high toping out in the mid $390’s. The big question now is weather the $275 mark is the low for the year or perhaps for a generation?

This question is still difficult to answer. It looks like there is technical precedence for this to be a major turning point, but the fundamental problems that bitcoin has been going through lately have not been resolved. It is still just as difficult to convince friends and family why they should go out of their way and convert their fiat money into bitcoins. Just because more and more places are accepting bitcoins does not mean the average person has reason to go out and purchase some. We will have to wait and see what kind of confidence this big move from $275 to $400 can instills in people. Unless noticed otherwise consider this move to be strictly caused by traders but if momentum and trend has shifted, just go with the flow.

The Month Ahead

Everything is driven by Price and Volume and they are both suggesting that this move is more than just a small rebound into another lower high. The high last week just under $400 at resistance is promising and once this resistance breaks to the upside we might see some more legs in this rally. What gives us a little confidence is the fact that the move came on large volume so it’s safe to say that too many people were happy to see the price in the $200’s and are ready to defend it at all cost. Nothing of course goes straight up just like it shouldn’t go straight down. A small pullback here to about $340-350 is perfectly reasonable, but if it goes below that we are back to the position of the week’s past where we saw a quick fall back to these yearly lows.

The Week Ahead

The RSI provided the perfect exit just under $400 on that rebound, but the fall from there to $350 happened so quick that it never got a chance to reach the oversold area. We have since went back up and tested that 70 mark one more time. This creates a slight dilemma. On the one hand we are expecting higher prices but we have not yet tested a sufficient higher low in the $340-350 zone. The overall stance right now is bullish but it’s a 50/50 call if we are to see that pull back to attempt another run at breaking $400. If $400 does break to the upside the $440-450 zone is very critical resistance and it would be important for that $400 to then act as support.

Conclusion

The big volume spike on the buying of last week’s lows should create some momentum. There is no reason to fight it so we will go with the flow. Keep a close eye on the $340 support and the $400 resistance. The expectation is for price to break through resistance, but we would have more confidence in this move if only there was a noticeable pull back with the RSI hitting an oversold level.

Reference Point: Monday Oct 13 8:00 am ET, HitBTC Price $380

About the author

Tone Vays is a 10 year veteran of Wall Street working for the likes of JP Morgan Chase and Bear Sterns within their Asset Management divisions. Trading experience includes Equities, Options, Futures and more recently Crypto-Currencies. He is a Bitcoin believer who frequently helps run the live exchange (Satoshi Square) at the NYC Bitcoin Center and more recently started speaking at Bitcoin Conferences worldwide. He also runs his own personal blog called LibertyLifeTrail.