Bitcoin hit a low of $3000 this morning and has since regained more than $600. Short-term trading signals are bullish, but bulls are not out of the woods yet.
Yesterday’s scary sell-off in Bitcoin was the result of exchange BTC China announcing it was ending its exchange services on September 30th in response to government decrees about the legality of third-party transfers of cryptocurrencies.
This was simply the latest move against the rapidly-rising alternative to the debt-based government-issued monetary system. They have been coming in hot and heavy for a couple of months now.
In my private blog I warned my subscribers at Patreon of this possibility, multiple times and provided them with strategic advice on how to profit from this.
Where is Bitcoin Now?
Bitcoin is now in the process of putting in a temporary bottom which could firm up into a real bottom if we get a reversal signal on the daily chart. That would require a close above $3920 or so by midnight tomorrow, depending on what exchange data you use.
For that would entail a two-bar reversal signal.
Right now, the hourly and 5-hour charts are have completed powerful one-bar reversals.
By bouncing so emphatically off of $3000 Bitcoin now needs to follow all the way through back above $4000 or risk a massive attack on $3000 next week. But, that’s getting ahead of ourselves.
One of the important things to remember when looking at reversals is whether the reversal holds up in longer time-frames. So, looking at the 5-hour bar chart we see that it has.
You can’t see it on this chart but the data is clear. Even the 5-hour chart threw a one-bar reversal… by about $0.50, ie. the high of the last down bar (3rd from the right) was $3377.80 and the close of the next up bar (2nd from the right) was $3378.50.
That’s a reversal. By a thin margin, but a reversal nonetheless.
It was confirmed by the follow-through action which took the price above potential resistance at $3609.80, the highlighted bar from yesterday at 9am.
In fact, the market is so strong that as I write this post, Bitcoin is jumping by $20 to $40. This 5-hour bar needs to close (at 3pm EST) above $3500 for me to feel comfortable that there’s a chance for $4000 tomorrow. Any fading of this rally here would be bearish and create the opportunity for the bears to pile back on and force the price below $3000.
To review how to spot reversals see this video I made yesterday covering the basics of candlesticks and reversals.
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