This alert’s main thought is that the move up has begun, the situation is bullish and we have adjusted our stop-loss level.

The news today is that Zynga, a company providing social games, has decided to accept payments in bitcoin. Among games which will support bitcoin are FarmVille 2 and CastleVille. This comes on the heels of a similar announcement by Overstock, a U.S. online retailer.

Most news services have taken this up and are now claiming that the recent move above $1,000 took place on the Zynga story. It’s considerably difficult to judge if this is true, since the news itself might have been a self-fulfilling “prophecy” – a move up materialized after the announcement was posted, which drew more investors into the market, which pushed the price up, which spawned more news about the move and Zynga, and so on…

What’s important, is the fact that we’ve finally seen the market move up significantly. Whether this causes enough momentum remains to be seen.

Bitcoin went 9.7% up yesterday on Mt. Gox compared with the previous close. The volume (btc 21,223.75) was the biggest since Dec. 26 and the currency ended the day at $1,015. This was the eighth day of gains in a row and the closing price fell into our initial upside range of $1,000-1,100.

The biggest question before today’s open was whether bitcoin would stop in the $1,000-1,100 zone or fly away. At the moment of writing these words (6:10 a.m. EST), the currency is 6.0% up from yesterday’s close and the volume has amounted to btc 7,640.34. Overall, what we’re seeing now seems to be another move up on considerable volume.

The move up has taken off. Bitcoin is trading in the $1,000-1,100 range which coincides with the Dec. 10 top at $1,068 (solid green line). If the currency takes out this level, it might move as high as to $1,200, around the Dec. 4 high.

If bitcoin depreciates, the nearest warning level is around $700 (Dec. 7 close). However, since we’ve had eight days of gains straight, and no asset moves up in a straight line, we might see a pause in the nearest future. Such a pause should be weighed against further possible gains from momentum (which has been up also today). At this moment, an insurance against a sudden significant move down could be in order while keeping long positions open. Because of that, we adjust our stop-loss level, moving it from $550 to $800 (dashed red line on the chart). We don’t suggest closing long positions.

Summing up, the big move has begun and bitcoin has moved up significantly. After eight days of gains a pause is possible, so we adjust our stop-loss level to shield investors from sudden depreciation. Momentum is still up so we don’t suggest closing long positions just now.

Trading position: long, stop-loss at $800. Any signs of the momentum drying up or reversing might be a signal to close long positions. Stay tuned.

Regards,

Mike McAra