In reality Bitcoin just goes up (and it DOES like techicals)
Did the up and down dollar send bitcoin higher? Was it the claims, personal income and spending, or maybe PCE? Did the rise in gold or oil propel the price higher?
I can't really connect the dots on that one, but the cyprtocurrency is moving higher again today and trades at yet another all time record of $4740.
Bitcoin just goes up.
Although there might be some "story" about how the miners approved some new technology, the fact is that buyers are overwhelming sellers when the price goes higher. The reverse is true when the price goes lower.
On Monday this week, the price did go lower. The sellers overwhelmed the buyers, but what I love about that move is the low stalled right at the intersection of the 100 and 200 hour MAs. Perfect. Bounce!
That says something to me. The "something" is that the market traders out there - the ones who overwhelm the sellers (or buyers) are leaning. In this case they leaned against both MAs with stops below. The level held and that attracted new buyers. The buyers returned to overwhelming the sellers.
If you look back in time and follow the blue and the green lines (blue is the 100 hour MA/green is the 200 hour MA), the market did a good time reacting to those moving averages. That is, the price tended to move away from those line (either bouncing off or breaking below and running) when approached.
The implications is traders can use the MAs as risk defining levels. Stay above, bullish. Move below bearish.
Putting it in dollars and cents terms, the buyers at 4184 on Monday against the 100 and 200 hour MAs risked a move below. That is not a lot of risk. The high today? $4840. That is a a $656 gain or 15.67% gain.
Now traders, might have taken profit at the topside trend line on Tuesday (red circle 3) but that still is a nice gain. They may have also bought against support vs the old August 17 high at 4477 on the dip yesterday. After all, bitcoin just goes higher. So buy dips (against technical support).
Am I surprised, the market is reacting technically?
No... I am not the only one that does not understand what drives bitcoin or what makes it tick. But I do know a MA or trend line when I see one, and so do other traders out there. So if risk can be defined and limited against those levels, the immense risk in bitcoin can be reduced. Make no mistakes traders, there is an immense amount of risk in bitcoin.
So what now?
Well, the 100 hour MA is a risk level at $4486 and moving higher (blue line in the chart above). Longs are likely to put stops below that moving average and trail it higher. As long as the price remains above, the price can go higher and higher and higher.
A closer risk level might be the old swing high from Wednesday. That level comes in at $4641. When the price moved above that level today, the price accelerated higher. There was a ceiling around that level. So a move below, should have traders who are long, getting more nervous (and attract selling).
On the topside, the upside trend line can be used to try and pick a top. That line comes in at 4840 (see chart above). It too is moving higher and is over $100 from the current level, but whats $100 when you are talking about bitcoin.
Why sell there? If you sell and the price stalls, you booked profit and can buy a dip. If the price goes above, you can always get back in.
SUMMARY:
Let's face it....Bitcoin just goes higher and higher and higher. However, at some point it will go lower and it could go lower and lower and lower..
Traders concerned about the risk, will use technical tools to define and limit risk, and leave the "stories" about minors votes, and new protocols and all the other "stuff" to the story tellers. After all, the price action will write the story.
So if you trade this cryptocurrency, be sure to know your risk and be disciplined. When something with "currency" in it's name (i.e., cryptocurrency) and it moves 15%, 20%, 100% or more, it can go down 15%, 20% and 100% or more. However, the technicals will keep your nose from getting too bloody and if you don't get bloody, you can simply ride the trend.
