The Bitcoin price hit $397.75 during the US trading session yesterday and has since retraced to $380. Trade has slipped back below the 20-period moving average on the 4-hour chart and downside looms… but where is it?
Bitcoin Price Decline Doesn’t Want to Play The 15-minute Bitstamp chart shows the upward curve of price action as it advanced toward $400. The wave high was $397.75 which is slightly below the $398 target defined by the 1.618 Fib extension of the initial wave of advance. However, drawing Fibonacci extensions from the first subwave of the advancing wave yields wave divisions that are internally consistent, with both 1.618 and 2.618 satisfied.
The structure of the subsequent correction is, depending on one’s interpretation, either an A-B-Cstructure that should soon reverse back up or the beginning of a new wave down. At the time of writing it had retraced to 0.618 of the preceding wave.
As for the state of completion of the wave declining from $397.75, MACD and RSI indicators in both 15-minute and hourly timeframe charts are reverse diverged. For the sake of non-technical readers, indicator divergence (regular divergence) is a condition whereby price makes a new high or low that is not confirmed by the indicator making an equivalent high or low. Reverse divergence, on the other hand, is a technical condition whereby price fails to make a new high or low, yet the chart indicator is displaying a new high or low. In the 15-minute chart above, price had made a higher low at 0.382 retracement. However, the MACD and RSI indicators are both making lower lows in relation to the previous price swing. The reverse divergence is annotated in magenta in the indicator panels at the bottom of the chart.

This post was published at Crypto Coins News on October 1, 2014.

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