The technical setups posted below use simple trend detection, support and resistance, channels, pattern and candlestick analysis. We aim for high-probability trade setups on BTC USD and use very few indicators. All charts use BNC’s Bitcoin Liquid Index for maximum accuracy.
The timeframe for trades is 1 to 7 days, so we’ll use 4h candlesticks. Bitcoin is best traded as a purely speculative commodity on 4h+ timeframes.
Market Sentiment And Macro Key Points
This section is an overview of news headlines or events that may affect BTC USD.
- Fear looms across the global financial markets as Deutsche Bank may need a bailout. Deutsche Bank is the most heavily leveraged institution in the world with over $42 trillion in derivative exposure. This may be seen as bullish for Bitcoin should investors decide to use it as a hedge as we saw in Brexit.
- Bitcoin Core has hinted on twitter that the Segregated Witness (segwit) code will be released at any moment. The segwit soft-fork includes a wide range of new technical features.
- UnoCoin, an Indian Bitcoin startup has raised $1.5M, showing that confidence and investments in the Bitcoin space is continuing to grow.
Long Term Technical Analysis
Not much has changed on the long term chart. The price has been ranging sideways in the $590 to $610 range over the last two weeks. We should see Bitcoin break out of this range within the next couple of days.
The beautiful inverted head and shoulders pattern is still in play. Volume has remained consistently high, which is a great sign for further continuation. We should see new highs this year should this pattern hold. Price remains at the lower part of the uptrend channel which gives us a favorable risk reward ratio for entry on the lower trend line support.
Long Term Trade Idea
We see a high probability of a breakout to the upside, with a favorable risk reward ratio. We can see that the Stochastic Indicator has printed a divergence when compared to the price trend. Usually when this happens there is a good chance that it will resolve to the upside.
Bitcoin may also be forming a bit of a short term trend channel. We can see the price action is holding on to the lower trend line as support. If looking to go long, we would recommend using that trend support at $600 as a guide to entry. Stops should be placed below $600. A mid term target would be $720 for this trade. Should the trend support fail at $600, we should see Bitcoin price fall to $560 in the short term.
Short Term Trade Idea
If we zoom into the 4hr chart, we can get a closer look at that lower trend line. We can also see a series of higher lows and higher highs over the past week which further enforces our bullish bias in the short and long term. We do expect price to break out to the upside to test the upper trend line of the potential ascending triangle pattern at $650.00. If the price moves lower, we should test $560.00.
With the potential banking crises in Germany, a potential price break out to the upside seems likely. There are also some key events coming up; the Scaling Bitcoin 2016 conference, on Oct 8th-9th; and the SEC decision deadline for the Winlklevoss ETF, on Oct 12th. We believe the price of bitcoin may have a speculative breakout to the upside going into these key events.