Bitcoin hits our 8k support

As noted in yesterday’s article, if we were to present a trade review of our best trade ideas for 2019, AUDNZD would feature prominently. One of our other top performers for 2019 would be Bitcoin which after this morning’s 15% fall, again warrants our attention.

In our most recent update on Bitcoin from August 27th, https://www.cityindex.com.au/market-analysis/august-rains-no-help-to-bitcoin/ we wrote that while traditional safe-haven assets including gold, the Japanese Yen and the Swiss Franc had all found solid support during the volatility of August, Bitcoin had remained “curiously” unloved.

The lack of movement in the Bitcoin price during August was perhaps the first real warning that something was not quite right.

Inevitably after the event, a variety of reasons are being offered as to the cause of the sell-down, including margin calls, a break of technical support and a new Bitcoin futures contract. However, one of Bitcoins inherent attractions is the opaque decentralised world in that it operates, and this means we will never know for sure what caused the drop.

Technically, the failure to break/close above trend channel resistance $12k in early August was a reason we suggested taking some profit on longs in the run-up to $12k. It was also the reason we suggested raising the trailing stop on all remaining longs to $10.7k, to ensure a profit on the long trade opened in late July at $9.7k. Since then we have remained sidelined, waiting to rebuy Bitcoin to break/close above trend channel resistance currently at ~$10.3k. Or on a dip towards the “200-day moving average near $8k.”

After reaching the 200-day moving average at $8k overnight, I would expect to see Bitcoins price stabilise in coming sessions. Assuming it does so and should a bullish daily reversal candle form that includes a daily close above the 200-day moving average it would warrant re-opening a small long position. I will then look to add to the long position on a break/close above trend channel resistance $10.3k, looking for a move to $15k. Keep in mind, that if Bitcoin fails to stabilise ~8k, the next downside level is not until trend channel support at ~6.8k.

Source Tradingview. The figures stated are as of the 25th of September 2019. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

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