Bitcoin Price Analysis — Selling pressure continues

The technical setups posted below use simple trend detection, support and resistance, channels, pattern and candlestick analysis. We aim for high-probability trade setups on BTCUSD and use very few indicators. All charts use BNC’s Bitcoin Liquid Index for maximum accuracy.

The timeframe for trades is 1 to 7 days, so we’ll use 4h candlesticks. Bitcoin is best traded as a purely speculative commodity on 4h+ timeframes.

Market Sentiment And Macro Key Points

This section is an overview of news headlines or events that may affect BTCUSD.

• BitFinex continues to restore services after the exchange was hacked on August 2nd. Exchange trading has been enabled for all currencies and pairs, alongside deposits and withdrawals.

• Russian government may not penalize Bitcoin users. Russian news agency Interfax reports that representatives from the country’s Ministry of Finance, central bank, and other government bureaus are increasingly dismissive of legislation that would punish those who use digital currencies with fines as high as $38,000 and jail sentences of up to seven years

Long Term Technical Analysis

BTC is still in a very bullish pattern. The up-trend channel is still holding strong, and could be forming a bull flag pattern above the $500.00 mark, a key price area.

This pattern is typically comprised of a large volatility upward impulse move, which resembles a flag pole. It’s then followed by a retracement that occurs downward in a near 45 degree angle. After this retracement is complete, a ‘measured move’ component breaks back to the upside, which is ideally equal to the original flag pole portion.

Also, looking at the “big picture”, we can see that Bitcoin may be forming a “cup and handle pattern” a very common and very bullish pattern. Should this pattern hold, we could see new all time highs soon.

Long Term Trade Idea

Generally, once you see price retrace about 50% of the initial flag pole price comes into a support zone, this would be your entry. If you are an aggressive trader, you can enter as price continues downward in the retracement in anticipation of a reversal. You may fall victim to less slippage and will get a better position if the measured move occurs. Entry into a long position in the $580 to $550 range would provide a manageable risk/reward ratio, stops should be set below $500.

If you are more conservative, you can wait for the price to break out of the upper channel and enter at that point. You’ll sacrifice initial trade location, but will put the odds a little more in your favor.

We can get a more clear look at the bull flag if we zoom in with 4hr time frame. We can see that BTC is still under heavy selling pressure.

Conclusion

With Bitfinex avoiding a potential MT.Gox scenario, we still hold a bullish bias on the price of bitcoin. A short position may be too risky this week, and it appears to be a good time to accumulate. The price may continue to fall further, to the $550, area as selling pressure resumes, but sellers should get exhausted soon.

Disclaimer: The information presented in this article is general information only. Information provided on, and available from, this website does not constitute any investment recommendation.