by Jamie Holmes
Panic mode gripped markets after the departure of Mike Hearn from the core Bitcoin development team, with the recent sell off pushing the price as low as $352 on the BitStamp exchange. Buying interest at these fresh lows has seen the price action drift around the $380’s. The price is currently trading at $386.69, up 1.72% on today’s opening price.
This so-called attack on Bitcoin led to panic selling after the market took Hearn’s comments that ‘Bitcoin has failed’ a little too seriously. Notable Bitcoin entrepreneur Simon Dixon stated today that what we have learned in the past few days is not that Bitcoin has failed but that banks have started to wage war on Bitcoin. Hearn will be part of the R3 development involving major financial institutions who want to create their own Bitcoin, dubbed by some as ‘bankcoin’.
The chart below shows the 4-hour price action along with the Ichimoku indicator, relative strength index and fractal levels In the previous 4 hour trading session, the price closed above the conversion line giving a weak bullish signal since the price is below the Ichimoku cloud. This means it is currently providing resistance in the area of the cloud, around $400 to $4385 for the 20th January onwards. Going forward there are two signals to look for.
First, the next critical resistance before the Ichimoku cloud lies at the base(red) line, currently at $392.05. A close of a 4-hour session above this level will indicate bullish momentum and there will be a higher probability of an extended upward move. Buyers will target fractal resistances at $425.01 and $438.
Second, if the price action closes back below the conversion line, this will give a strong bearish signal and indicate a higher probability of an extended downward move. The conversion (blue) line is currently providing minor support at $381.06. A close below the conversion line will see sellers target fractal supports at $373.63, $352 and $328.94.
The resistance provided by the Ichimoku cloud is trending down from $440 for today to around $420-$400 tomorrow. This portion of the cloud is very thin indicating weak resistance. The relative strength index indicates that the market was oversold near the lows of $352 and has since recovered to 42; a move above 50 should see the market attempt to push the price back above the Ichimoku cloud.
The shorter term outlook is more skewed to the upside as the hourly chart below shows that the price action is above the Ichimoku cloud and is green. Also, the conversion line has recently crossed above the base line indicating bullish momentum. Immediate resistance is provided at $388.50 and then at $392.07 and $394.84. A break of these fractal levels will then see buyers take BTC-USD higher to test further fractal levels above $400.
Going forward, the cloud should provide support around $372 to $380. A move that maintains below $372 will give the first indication of bearish dominance. An hourly close below the most recent buy fractal at $376.09 will give a strong sell signal and should see sellers take BTC-USD back to recent lows of $366.70.
The relative strength index is indicating bullish momentum and is trending upwards, currently at 59.7. Further room to the upside is therefore indicated and sellers should only look to enter the market once the index crosses back below 50 and there is a close below the conversion line, currently at $382.30.