Trade Recommendation: Bitcoin

The Bitcoin/US Dollar pair has been bearish since it generated a lower high of $17,178 on January 5, 2018. That means that the pair has been in bear territory for six months now. Recently, it recorded a new 2018 low of $5,777.00 and broke the $6,000 long term support. This triggered numerous stop losses. Predictions for a move down to $3,000 levels reverberated all over the internet.

Along with these doom and gloom forecasts were articles preaching that Bitcoin is dead. It appears that fear has gripped the market as blood ran on the streets and for good reason. Bitcoin lost over 70% of its value from its peak of $19891.99. However, experience has shown me time and time again that a bottom is in place when participants have lost all hope in the market. We have technicals on our side to support this view.

Technical analysis show that BTC/USD is currently carving a bottom at $5,800 – $6,000. As you can see on the chart below, the pair has created three falling wedges inside one large falling wedge. Three is the key number here because bear or bull runs often come to an end after three pushes. If you can zoom in on the most recent wedge, you will see that BTC/USD has formed three bearish pennants. Exhaustion is usually the case after the third push.

Also, indicators are flashing bullish signals. We can see bullish divergence on the RSI and MACD. Consider these signals and it is not farfetched to think that the move below $6,000 is a false breakout.

The strategy is to buy as close to the retest of $5,800 as possible. If bulls succeed on defending the support, it will be the start of an aggressive bull run that will initially take the pair to our target of $8,000.

The process may take a month.

Daily Chart of BTC/USD on Coinbase

As of this writing, the BTC/USD pair is trading at $6,079.47 on Coinbase.

Summary of Strategy

Buy: As close to $5,800 as possible.

Target: $8,000

Stop: $5,550


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, 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.

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