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China Suspends Stock Trading; Global Stock Indices Down, Bitcoin Up

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A Kumo breakout for BTC-USD occurred early in Thursday’s Asian session with bulls reaching their target of $452.03. This breakout was driven by panic selling in the stock market, where China’s stock trading was halted after slightly less than 30 minutes. Echoing events yesterday, the CSI 300 index dropped almost 7%. The China Securities Regulatory Commission introduced stringent trading rules in an attempt to contain the ongoing sell-off, declaring that major shareholders couldn’t sell more than 1% of a company’s share for a period of three months, starting January 9th.

Global stock markets are moving deeper into the red; is it a panic reaction or the start of a crisis? Either way, it represents a positive fundamental theme for Bitcoin. Safe haven currencies such as the Japanese Yen and Swiss Franc outperformed major currencies today along with Bitcoin, which has gained almost 6% so far today. BTC-USD currently trading at $455.01 on the BitStamp exchange.

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The Yuan’s falling value and restrictions on stock market activities means that Chinese investors are looking to Bitcoin as one possible avenue to store their wealth and as a means of protection. The onshore Yuan has weakened to a five-year low as the People’s Bank of China cuts its base reference rate; this has increased the perception of risk present in global markets, signalling that the slowdown in Chinese economic activity may be a lot worse than the official data suggests.

Gold saw an extended upward movement from $1077 per ounce to a high of $1102 so far today, in response to the panic selling, with BTC-USD starting to follow gold higher. Trading volumes across all exchanges spiked from 00:00 to 08:00 GMT on Thursday, suggesting a large influx of new buyers, but volumes traded have since calmed down. Immediate resistance lies at $457.63, $464.09 and $474.01 while support will be found at $446.86 and $430.89. A break above $474.01 is likely to see bullish momentum extend above the key resistance at $502.00 and post fresh highs.

The chart below shows the 4-hour price action. The Kumo has started to trend upwards and provides support at a higher level around $440 for the beginning of next week. The lagging line has moved above the Kumo. Finally, the conversion line is trending upwards and above the base line. All of these signals suggest that buyers are dominating and will continue to do so. The key levels to watch out for are conversion and base lines. These should provide support going forward at $441.05 and $439.76 respectively. A bearish outlook will be validated if the price action closes below either the conversion line or base line.

However, buyers should be cautious as the relative strength index is starting to enter overbought territory as the index is currently at 70.05. This means that the market could face a correction before testing the key fractal levels at $464.09 and $474.01. On the other hand, it could trend higher and move deeper into overbought territory before retracing.