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Bitcoin Market Technical Analysis: What Goes Up Can Come Down

Bitcoin Market Technical Analysis: What Goes Up Can Come Down
Written by
Richard Sandle
Published on
November 30, 2017
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Bitcoin continues to defy any and all conventional market logic.While all the cryptocurrency market media pundits marked $10,000 as a major milestone for Bitcoin, it not only surpassed said milestone, it continued on to trade above $11,000 making a new all-time high of $11,312.327; all in the same day.Chart #1 below shows the breakout from the uptrend channel, and the virtual straight-line price surge it made to the $10,000 level over the course of four days.The range of the daily price bar for November 29, 2017 spanned from a low of $9250 to a high of $11,395. This accounts for a $2145 price fluctuation over the course of one day.The last significant price downswing that Bitcoin experienced was on November 9th, and went from a high of about $7888, to a low of $5555.55 three days later on November 12th.This downswing accounted for an approximate move of $2288. The price downswing before that which preceded the current uptrend on September 2, 2017 moved price downward $2089.

Chart #1: Bitcoin Daily

The difference between the last two downward price swings on the daily chart, and yesterday’s (November 29th) intraday downward price move is the span of time over which they took place.In Chart #2 below, the shaded area shows the price action for November 29th on a 5-minute chart. When spread over multiple bars, the price dip looks like favorable entry point for a long position.But on the daily chart (Chart #1) the price dip, albiet over $2000, seems very short lived.

Chart #2: Bitcoin 5-Minute

While there is a very strong likelihood that Bitcoin will again make new highs soon, timing is critical when considering entering long into a market that consistently hovers near its highs as Bitcoin does.Although it may be very tempting to initiate a long position when Bitcoin is surging like an “out-of-control bull,” traders run a high risk of experiencing a substantial drawdown when taking a long position this close to an all-time high.Markets will not perpetually surge to the upside.At some point profit-taking and short-covering will take place, and price will exhibit a retracement and consolidation before moving on to new highs.This can be seen on the daily chart (Chart #1) as noted by the areas labeled “significant price downswing.”The savvy trader will wait for a price downswing similar in range and duration to minimize the risk of immediately falling out-of-the-money when assuming a long position this close to a high.However, for Bitcoin, this may require a great deal of patience and discipline.We will be watching.Image courtesy of Antana via FlickrDisclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.

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