Originally published by AxiTrader
(Bitcoin) had a big fall last week or so.
From prices near $20,000 BTC/USD dropped to a low around* $10,700 before a big bounce over the weekend to sit around $15,666 this morning.
That's both a big fall and a tantalising bounce of around 45% apiece.
Some crypto bulls like Tom Lee from Fundstrat believe Bitcoin is still going substantially higher.
Business Insider reports that in a note Friday Lee revised up his 2018 target from $11,500 to $20,000 and said "fair value" for Bitcoin is around $19,103.
That's a substantial increase from the current level around $15,700.
But Bloomberg reports that another noted Crypto bull Michael Novogratz has "shelved plans to start a cryptocurrency hedge fund and predicted that the digital money may extend its plunge to $8,000".
Bloomberg says that Novogratz told them in a phone interview Friday "we didn’t like market conditions and we wanted to re-evaluate what we’re doing...I look pretty smart pressing the pause button right now.”
That's a big spread - $12,000 - between what Lee says Bitcoin will do and where Novogratz says BTC/USD is headed.
So where's it headed?
The reality is that daily volatility for Bitcoin has shot materially higher in recent weeks with the 20 day average true range - my preferred measure of volatility when I'm trading - increasing from around $500 in November to the current level of just shy of $2,000 - $1985 to be exact.
So the reality is both Lee and Novogratz might be right. The question is in what order.
Looking at the chart it is clear that there are multiple levels and multiple time frames at play here.
Initially, Friday Bitcoin respected the confluence of FIbo and trendline support around $13,000/13,200 region.
But in European and North American trade prices came under pressure again and BTC/USD made a low around $10,700 which was the 50% retracement level of the rally from $3,000 - the first big dip we had a few months back - to the recent high.
So it is clear that traders are still using technical indicators as a roadmap to where support and resistance should be for Bitcoin.
ON THAT BASIS - and because I do believe that like the Asian currencies when the peg broke in the 90's crisis technicals work well in a realm of difficult to value assets - I'll refer to the outlook based on the levels suggested by my charts.
The first thing to note is that my system generated a sell signal on December 19. And while the fall to $13,000/200 satisfied the inital target that expectation of further weakness remains in place for the moment. But the fact that Bitcoin bounced back to hold the trendline intra-day also suggests that the initial target satisfaction was the correct call even though the run to $10,700 would have been missed - for the most part anyway.
That combination puts the focus back on a consolidation of that fall. That means the $16,100 region is important being the 61.8% retracement of the fall to $10,700. Above that $16,735 looks like and interesting trendline worth watching.
If Bitcoin breaks these levels it could run back to the highs in the mid $19,000 region.
Should this overhead resistance hold then a move back toward $14,600, and $14,050 is on the cards. A break of the latter opens a move back to $13,000/200 and if that breaks its back toward Friday's lows.
Here's the chart.
*PLEASE NOTE: I have written "around" numerous times in this article to reflect both the volatile nature of BTC/USD and also the multiple pricing sources that traders may see and which can differ from the pricing I see on my MT4 platform or other market sources.
Have a great day's trading.