Bitcoin Market Technical Analysis: What Goes Up Can Come Down

Bitcoin continues to defy any and all conventional market logic.While all the cryptocurrency market media pundits marked $10,000 as a major milestone for Bitcoin, it not only surpassed said milestone, it continued on to trade above $11,000 making a new all-time high of $11,312.327; all in the same day.Chart #1 below shows the breakout from the uptrend channel, and the virtual straight-line price surge it made to the $10,000 level over the course of four days.The range of the daily price bar for November 29, 2017 spanned from a low of $9250 to a high of $11,395. This accounts for a $2145 price fluctuation over the course of one day.The last significant price downswing that Bitcoin experienced was on November 9^th, and went from a high of about $7888, to a low of $5555.55 three days later on November 12^th.This downswing accounted for an approximate move of $2288. The price downswing before that which preceded the current uptrend on September 2, 2017 moved price downward $2089.

Chart #1: Bitcoin Daily

The difference between the last two downward price swings on the daily chart, and yesterday’s (November 29^th) intraday downward price move is the span of time over which they took place.In Chart #2 below, the shaded area shows the price action for November 29^th on a 5-minute chart. When spread over multiple bars, the price dip looks like favorable entry point for a long position.But on the daily chart (Chart #1) the price dip, albiet over $2000, seems very short lived.

Chart #2: Bitcoin 5-Minute

While there is a very strong likelihood that Bitcoin will again make new highs soon, timing is critical when considering entering long into a market that consistently hovers near its highs as Bitcoin does.Although it may be very tempting to initiate a long position when Bitcoin is surging like an “out-of-control bull,” traders run a high risk of experiencing a substantial drawdown when taking a long position this close to an all-time high.Markets will not perpetually surge to the upside.At some point profit-taking and short-covering will take place, and price will exhibit a retracement and consolidation before moving on to new highs.This can be seen on the daily chart (Chart #1) as noted by the areas labeled “significant price downswing.”The savvy trader will wait for a price downswing similar in range and duration to minimize the risk of immediately falling out-of-the-money when assuming a long position this close to a high.However, for Bitcoin, this may require a great deal of patience and discipline.We will be watching.Image courtesy of Antana via FlickrDisclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.