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Important Developments

October 24, 2019, 1:48 PM Mike McAra

In short: speculative short positions, target at $3,200, stop-loss at $9,300.

There is a lot of bearish news flying around right there, particularly with the Libra testimony. The current situation provides us with more implications for the short- and long-term.

The move in Bitcoin has precipitated a flurry of news on the move down. In an article on Decrypt, we read:

Bitcoin crashed by over $500 in just a five minute period as it fell from $8,000 to hit a low of $7,400 today during a violent 30-minute sell-off. It has since bounced back up to $7,450. The price drop came moments before Facebook CEO Mark Zuckerberg’s testimony to Congress over Facebook’s Libra.

This is the second eye-watering drop for the number one cryptocurrency by market cap in recent weeks. Last month, the price of Bitcoin dropped from $10,000 to $8,000.

The focus is on Zuckerberg’s testimony but any price move caused by this could potentially be reversed after the statement. Also, the statement itself could be used to argue a move in any direction. The general idea seems to be that no matter what happens with Libra, it’s important and relevant for Bitcoin. It might be not, but there’s also the possibility that the expectations are bending the market. It might just as well be the case that Libra itself is not that important for Bitcoin but the fact that investors react to Libra news might move the market itself. And so, we still keep our eyes peeled.

Breakdown Confirmed

On the short-term BitStamp chart, we see the move down quite clearly.

Bitcoin chart BitStamp

Recall what we wrote in our previous comments:

Our previous observations remain unchanged in that Bitcoin has not broken back above the 38.2% retracement. We are seeing a move away from the 50% retracement but this move has not been strong enough to shift the short-term outlook. What’s important here is the fact that looking at the RSI, we see that the situation has gone to the place where Bitcoin is no longer oversold.

The situation is exactly as it was a couple of days ago. Bitcoin is after a weak move to the upside and the breakdown below the 50% Fibonacci retracement level is now invalidated. This is slightly bearish. The RSI out of the oversold area is also supporting this point of view. But the bullish indications are pretty weak as the move is not pronounced and the volatility is also weak.

Bitcoin has gone down, which is a slightly bearish sign, but mostly because of the fact that we have now seen a small move up which was quickly invalidated. The currency is now right at the 50% Fibonacci retracement level. In a way, this is similar to what we saw some time back, only more bearish. We haven’t seen an important breakdown but the situation is more bearish now that it was previously.

Bitcoin is still very close to the 50% Fibonacci retracement level. No change here as Bitcoin has not moved all that much in the last couple of days. The RSI is out of the oversold level and this suggests that the currency is not in a position where there has been very strong selling. This could mean that there is more room for declines.

The focus is on Zuckerberg’s testimony but any price move caused by this could potentially be reversed after the statement. Also, the statement itself could be used to argue a move in any direction. The general idea seems to be that no matter what happens with Libra, it’s important and relevant for Bitcoin. It might be not, but there’s also the possibility that the expectations are bending the market. It might just as well be the case that Libra itself is not that important for Bitcoin but the fact that investors react to Libra news might move the market itself. And so, we still keep our eyes peeled.

Continuation of a Trend

On the long-term Bitfinex chart we are seeing the move down as well.

Bitcoin chart Bitfinex

If you recall our previous alert:

Relative to the short-term outlook, the long-term situation is more bearish. The currency is firmly below the 61.8% Fibonacci retracement level, which suggests that the shift to bearish is still very much in place. Our take is one that Bitcoin is still in the process of possibly forming a bottom. This could take an extensive amount of time to be completed. If we do not see a strong rebound here, the situation might remain unchanged and more depreciation could follow.

And we have not seen a strong rebound. This, along with the fact that the breakdown below the 61.8% Fibonacci retracement still holds suggest that in spite of the lack of depreciation, the situation remains bearish. At the same time, it is quite possible that the ETF news is not reflected in the price or is not driving the market just now. At this moment, the overall outlook looks bearish.

Not only have we not seen a strong rebound so far, but actually the recent move up was just reversed. This was more important from the short-term perspective but what about the long-term perspective? The main thing is that the recent action hasn’t really been that visible. If we take a step back and look at the picture, then we see that the main suggestion from the current situation might be that there has been no invalidation of the breakdown below the 61.8% Fibonacci retracement level. The next move to observe is a potential move to around $6,700 and how Bitcoin might behave there.

And the situation persists with Bitcoin still below the 61.8% retracement. This means that the currency is still in bearish mode and the currency might now be open to depreciate even more. Bitcoin could still go up and test the 61.8% retracement but the overall outlook remain bearish in our opinion.

The recent move down is a continuation of the previous bearish situation. Bitcoin is now after a confirmed breakdown below the 61.8% retracement and the situation is now more bearish than before. The next target from the long-term perspective is the $6,370 area. A break below this level could open Bitcoin up to a more serious move down.

Summing up, in our opinion short speculative positions might be favorable at the moment. The move down has made the situation even more bearish now.

Trading position (short-term, our opinion): short positions, target at $3,200, stop-loss at $9,300.

Thank you.

Regards,

Mike McAra
Bitcoin Trading Strategist
Bitcoin Trading Alerts

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