As you might have guessed my overall outlook on bitcoins is bullish and I’m convinced we’ll see them going for much higher prices in the future. Having said that, the short term is not looking great in my view. This opinion is based on my technical analysis of the charts. See one month chart below.
As you can see we are still in the uptrending channel, however the price has noticable flattened out in the last few days followed by another dip fairly similar to the one I wrote about in a previous blog entry. In the previous dip we bounced back above my midline trend line. Will this happen again this time? I think its more likely that this time the price will fail to break up through that mid-line.
By looking at the RSI and momentum indicators which I’ve included in todays chart we can see that the two recent lows in momentum are getting lower even though the price was higher.
Market depth seems to bear out the bearish analysis.
[edit: – removed images of market depth – I hadn’t realised at the time I posted they were ‘live’ images, have removed because they no longer reflect the situation I was describing at the time I wrote the blog entry]
This sample is representative of Mt.Gox, the biggest bitcoin market and presumably is a good approximation of the overall market. At this moment in time the sellers appear to be starting to overwhelm the buyers as we get close to the old highs.
Going out on a limb I’m expecting quite a steep correction here that will likely fall down through the bottom of my uptrending channel, this might be a good time to take some profits.
Just been having another look on the 10 day chart (sorry no image), and the lows getting lower in momentum doesn’t hold, which makes me a bit less confident in my analysis. However there do look like lots of sellers waiting in the wings. Anyway, I’ve put my money where my mouth is and sold a few. Now to wait and see if I was right or should have held on..