Trade Recommendation: Bitcoin

The Bitcoin/Dollar pair (BTC/USD) lost all bullishness on January 6, 2018 when it generated a lower high of $17,234.99. Things went from bad to worse for the market when it broke support of $12,000 on January 16. BTC/USD nosedived until it bottomed out at $5,920.72 on February 6.

The pair quickly rallied as soon as it found the bottom. It went as high as $11,780 on February 20 before pulling back to as low as $9,260 on February 25. With a higher low in place, it appears that the market is set to reverse its bearish trend.

Technical analysis show that Bitcoin/Dollar is creating an inverse head and shoulders reversal pattern that hinges on the breach of $11,700 resistance. To do so, it needs massive volume of 71,000 bitcoins. Those who bought the bottom of $5,920.72 are very likely to sell positions at the resistance of $11,700. The market needs the prescribed volume to increase its chance of a breakout.

The strategy is to buy the breakout at $11,700 with volume of 71,000 bitcoins. A successful breakout will launch the market to our target of $16,500. The process can take a month.

Daily Chart of Bitcoin/Dollar on Bitstamp

As of this writing, the Bitcoin/Dollar pair is trading at $10,982.55 on Bitstamp.

Summary of Strategy

Buy: Breakout at $11,700 with volume of 71,000 bitcoins.

Target: $16,500

Stop:  $11,000 after breakout at $11,700.

 

Disclaimer: The writer owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.