Bitcoin Trading Alert: Time to Back Out?

Today, trading activity might have ticked up (we still haven’t seen the daily close figure) but this hasn’t been accompanied by a visible move down. Bitcoin has lost 0.2% so far, which is hardly a move suggesting any sort of short-term outlook on its own.

In the lack of a clear reading of the situation on BTC-e, we resort to another sort of analysis. We will look at situations in the recent past that were similar to what we see today.

The chart above presents a longer time perspective than the charts we usually post in our Bitcoin Trading Alerts. Recently, we’ve seen a move up, not a very strong one but still and this move was followed by depreciation erasing most of the previous gains and then by an inconclusive close. Similar developments have been marked in grey on the above chart. We have one such case in January, one in April and one at the turn of April and May. All of these cases were followed by further depreciation, stronger (April) or weaker (April/May) but we didn’t see a decisive move up in any of these cases. If we assume that nothing has changed in the market since January, this analysis partly reinforces the bearish short-term outlook and might help clear up the muddled signals coming from BTC-e.

Consequently, we still stick to our opinion that short speculative positions might be the way to go now.

Summing up, in our opinion short speculative positions might become (even more) profitable in the near future.

Trading position (short-term, our opinion): short, stop-loss $470. We would expect to see a stronger move down in the near future.

In short: we still support having short speculative in the Bitcoin market, stop-loss at $470.

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About the Author

Mike McAra is a quantitative analyst focused on the economic reality, not theoretical models. His investment thinking is grounded on empirical evidence and common sense. Mike joined Sunshine Profits in 2009. He develops innovative investment tools, verifies usefulness of popular techniques, and provides thorough internal research. His quantitative and financial background, along with experience in the gold market and personal interest in bitcoin led to the launch of our Bitcoin Trading Alert service.

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