Stalking an October Reversal Play in Bitcoin

Oct 7, 2014: 10:27 AM CST

Might Bitcoin be setting up a spike-reversal from an arc trendline pattern into support?

There’s no guarantee but let’s study the pattern and note the key levels to watch for a possible breakout here.

The chart above shows the Bitcoin/US Dollar pair and notes the stratospheric, emotional rise from the 100 level to the late 2013 peak ten times higher near 1200.

From there, we see a stable downtrend and reaction lower which was interrupted by a rally phase in May 2014.

Now, we see an arc trendline pattern (blue) take price all the way back to the yellow highlight into the 350 level from which the psudo-currency reversed higher in April.

We can zoom-in on the pattern to highlight the potential opportunities for the near-term future:

“Arc” Trendlines tend to develop ahead of reversals, and traders can play aggressive entries when price breaks through the falling upper trendline.

We’re also seeing long lower shadow reversal candles develop into the 320 level which is just beneath the prior reversal spike into 350.

This is a rather simple analysis but it does highlight a key support zone, reversal candles, and a falling arc trendline, all of which do suggest caution into this area for a possible inflection/bounce higher.

We can’t be biased, so any further selling could drop price further in the arc trendline (steepening) channels lower toward 250.

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Corey Rosenbloom, CMT
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