Chart analysis: 4 month chance for rally ahead !!

[Minsc]

Wednesday is the day to rally.  It will keep going up up up and up!

[1713491318]

1713491318

[Dargo]

Actually, there are very sound economic reasons for chart patterns being valid.  I read a book a long time ago that went into just that.  Fascinating stuff.

For example, let's say someone has a long position.  A stock hits a high, then drops down.  "Man, I should have sold.  If it ever gets that high, I'll definitely sell!"  Multiply by millions and you have a resistance level.

Now, let's say a popular stock has a dip.  "Man, I should have bought.  If it ever gets that low again, I'll definitely buy!"  Multiply by millions and there's your support.

Charting is just a way to identify lifecycles of trends and trader (but more importantly, investor) mindset.   Used properly it can let you be in a position when it is likely the position will continue yielding profits and out when it is less likely.  It's a timing tool.

That said, TA is mostly trailing indicators.  There are very few predictive tools in the box, and the don't signal every time.  When they do, it's highly likely you've got a good read on the market.

I agree with everything you're saying, but insofar as you're calling these "economic" reasons, I guess you must mean the economic position of individuals and their investment/trading positions (multiplied many times over)? I prefer to call this trading psychology rather than economics, but it's just a matter of semantics I guess. And either way, this needs to be distinguished from fundamentals (i.e. the "intrinsic" worth (whatever that means) or future popularity of bitcoin as a currency).

[grod]

And either way, this needs to be distinguished from fundamentals (i.e. the "intrinsic" worth (whatever that means) or future popularity of bitcoin as a currency).

Oh absolutely!   "Fundamentals trump technicals" and "there are no billionaire chartists" are as true as "never catch a falling knife", "the trend is your friend" and my favorite, "bulls make money, bears make money, but hogs never make money."

Trading driven exclusively by chart reading is precisely like driving by looking only in the rear view mirror.  You can do it just fine so long as nothing jumps out in front of you.  Look to the side every so often and you just might notice the moose headed your way.

[Dargo]

And either way, this needs to be distinguished from fundamentals (i.e. the "intrinsic" worth (whatever that means) or future popularity of bitcoin as a currency).

Oh absolutely!   "Fundamentals trump technicals" and "there are no billionaire chartists" are as true as "never catch a falling knife", "the trend is your friend" and my favorite, "bulls make money, bears make money, but hogs never make money."

Trading driven exclusively by chart reading is precisely like driving by looking only in the rear view mirror.  You can do it just fine so long as nothing jumps out in front of you.  Look to the side every so often and you just might notice the moose headed your way.

A few of these slogans I don't entirely agree with:

"Fundamentals trump technicals" - Depends on what you mean by "trump" I guess. Long term, price will have to catch up to fundamentals, but in the meantime price action can go astray, and you need technicals to analyze this. I think there is a slogan that goes something like, "fundamentals can tell you that a move is going to happen, but not when it is going to happen (and you need technicals to gauge the when). IMO, a "complete" investor/trader needs to understand both fundamentals and technical chart analysis.

"there are no billionaire chartists" - maybe not, but there are lots of millionaire chartists, which is good enough for me. 

"never catch a falling knife" - Actually, I do this a lot with good success, but it takes a lot of experience to do it right, and you have to be very disciplined with stops in case you catch the knife too early. And often it is just for a short-term trade. Much harder to gauge long term bottoms. But basically, when panic capitulation type selling sets in, its time to start stalking an entry point.

[netrin]

矛盾 : spear shield : paradox : when an unstoppable force meets an immovable object

You've got a one year rising support colliding with a 3 month falling support and resistance meeting in the neighborhood of $5 as you would have shown on a log chart. One has to break. Why do you choose one over the other?

[ineededausername]

矛盾 : spear shield : paradox : when an unstoppable force meets an immovable object

You've got a one year rising support colliding with a 3 month falling support and resistance meeting in the neighborhood of $5 as you would have shown on a log chart. One has to break. Why do you choose one over the other?

Maybe because the latter is a long-term trend, so it is stronger?

[netrin]

$/BTC broke out of the long term trend April/May, hasn't returned to the long term trend until August and we are already one month later at the bottom of that channel. My bet is similar to the OP, but I wouldn't be surprised if we drop below the long term trend in proportion to the breakout that lead us to $32. For every crest there's a trough.

[N12]

My bet is similar to the OP, but I wouldn't be surprised if we drop below the long term trend in proportion to the breakout that lead us to $32. For every crest there's a trough.

I have thought about the same thing ever since it became apparent to me that this correction is not a normal one.

Here’s a try. The result is pretty terrifying, as it shows a potential to ~0.5.



Thoughts?

[coined]

My bet is similar to the OP, but I wouldn't be surprised if we drop below the long term trend in proportion to the breakout that lead us to $32. For every crest there's a trough.

I have thought about the same thing ever since it became apparent to me that this correction is not a normal one.

Here’s a try. The result is pretty terrifying, as it shows a potential to ~0.5.



Thoughts?

I think we are going to find out soon, since were right there  

I would like to think bitcoin has attracted alot of attention during the run up to $30 and also during the decline, I think people have been waiting and watching the decline looking for the perfect time to get in. some people think because it stopped rallying it means there are no new speculative investors, but a smart investor wont buy in a bear market, he will wait. it was probably one of them that drove it to 7 just now.

more importantly it's not like the blockchain got borked or anything, bitcoin itself is fine and the protocol is still 100% working as intended. and new things are always on the horizon, so I think there is enough interest in bitcoin that will stop it completely crashing long before 0.5   you never know though,

you really don't want a complete crash, even speaking as somebody who has sold and waiting to buy back, if it falls to low it may never recover. and trading is over.

[caston]

My thoughts are that the downslide has taken much longer than the take off. This is a good sign because rising stocks always rise faster than they fall.

[coined]

My thoughts are that the downslide has taken much longer than the take off. This is a good sign because rising stocks always rise faster than they fall.

there may be something in that also, I remember during the rise to 30 people were saying that a parabolic rise is followed by a similar decline, but it didn't happen that fast, it's a drawn out decline, that was one of the theory's of it not being a bubble and that another huge wave upwards is coming.

I guess we'll see either way 

[netrin]

It's not going to drop to $0.5 tomorrow. In fact, I think it's just as likely that we've corrected sufficiently from the $32 high.

there may be something in that also, I remember during the rise to 30 people were saying that a parabolic rise is followed by a similar decline, but it didn't happen that fast, it's a drawn out decline, that was one of the theory's of it not being a bubble and that another huge wave upwards is coming.

If you look at the bubble in relation to the trend (violet line perpendicular to thin red line) it is perfectly symmetrical. The take off from $8 is popularly credited to the Silky Gawker article. We've returned to the trend and $8 in August. Now, I believe, we're just continuing down with momentum.

I don't know if you can feel it, but the grumpy mood has lifted from this forum. Or maybe Cosby coins were a good laugh.

[Technomage]

To me the bubble has entirely deflated, a further downtrend from $4.xx would have nothing to do with a bubble anymore. That would be a decline to an economy size below the latest bubble. I can't see that happening right now though because the economy is still around 6-7 times larger than at the start of 2011, for example.

What I see right now is a possibly fairly long struggle between $4 and $6. The lower range is the buyers zone and the higher range is for sellers. Where it will go from here depends on if the economy keeps shrinking or not. To me the most likely scenario is that the degrowth levels off relatively soon, and the charts support this, and then a new bubble will start forming.

This is the big challenge for Bitcoin. No longer can we count on miners coming in and getting interested in Bitcoin, because mining is pretty much as unprofitable as it has ever been. Mining was one of the things that got me originally interested in Bitcoin, but I wouldn't be a bull if I only got interested in that.

Bitcoin is a revolutionary medium of exchange and that is where it must flourish next. I see a good number of services and tools being developed that could do just that, but time will tell.

[netrin]

Teenage miners who can't keep their pants on for three months, but start ejaculating coins as soon as they see lowered prices, are not a healthy base for this economy. We might all go blind.

[zby]

To me the bubble has entirely deflated, a further downtrend from $4.xx would have nothing to do with a bubble anymore. That would be a decline to an economy size below the latest bubble. I can't see that happening right now though because the economy is still around 6-7 times larger than at the start of 2011, for example.

What I see right now is a possibly fairly long struggle between $4 and $6. The lower range is the buyers zone and the higher range is for sellers. Where it will go from here depends on if the economy keeps shrinking or not. To me the most likely scenario is that the degrowth levels off relatively soon, and the charts support this, and then a new bubble will start forming.

This is the big challenge for Bitcoin. No longer can we count on miners coming in and getting interested in Bitcoin, because mining is pretty much as unprofitable as it has ever been. Mining was one of the things that got me originally interested in Bitcoin, but I wouldn't be a bull if I only got interested in that.

Bitcoin is a revolutionary medium of exchange and that is where it must flourish next. I see a good number of services and tools being developed that could do just that, but time will tell.

How this is different from your previous predictions that did not hold?  We all know that it cannot drop below 0, the trend has to stop somewhere - but why at 5 and not at 2 for example?

[Technomage]

Teenage miners who can't keep their pants on for three months, but start ejaculating coins as soon as they see lowered prices, are not a healthy base for this economy. We might all go blind.

This is so true. And the nature of the whole economy and the type of people owning BTC will be a little different from now on. Of course it is possible that a new bubble could make mining very profitable again for a while which can change the game again, but overall we're moving towards a healthier base as time goes on.

[Technomage]

How this is different from your previous predictions that did not hold?  We all know that it cannot drop below 0, the trend has to stop somewhere - but why at 5 and not at 2 for example?

This is different because before I was mostly spewing numbers out that were not based on anything except my feelings. Those had nothing to do with real analysis. I don't have the tools to call any low's or something like that so I've stopped doing that, but the overall fundamentals are something I've looked into and I believe there is merit to them.

The main basis for seeing the $4-$6 range as the critical point is the economy size, based on the number of daily transactions. As can be seen from this graph (http://pi.uk.com/bitcoin/charts/n-transactions), there is a fairly decent correlation between the price and number of transactions. I know correlation is not the same as causation, and I'm not claiming anything like that, but this is not only about the charts.

The real Bitcoin economy has grown massively this year with much more actual trade happening for goods and services. Now there has been a decline which corresponds with the price decline of BTC/USD very well but the decline seems to be leveling off.

Of course it's possible that it's only leveling off to drop more, after which my $4-$6 range would no longer apply. But that's the point where you need to forget the charts and look at what's happening in the Bitcoin world, I see a lot happening and enormous potential for more trade and thus more transactions and thus a higher price, so I feel the situation is still good long term.

To summarize, simply compare the transaction count from when the price was at this level the last time, earlier this year. If that correlation continues to hold true we can't go much lower unless the economy suffers significant further degrowth. And it doesn't look like that right now.

[Technomage]

I don't really see a strong trend either way, the market is figuring that out and it might take a while until a trend emerges.

[zby]

...

To summarize, simply compare the transaction count from when the price was at this level the last time, earlier this year. If that correlation continues to hold true we can't go much lower unless the economy suffers significant further degrowth. And it doesn't look like that right now.

How do you use that correlation to predict anything?  The fact that now the transaction count is at such and such level and that this correlates with the current price does not tell you anything with future prices - or does it?  Or do you say that the transaction count leads the price?  I don't see that from that chart alone - but if you show me I might change my opinion on this.  Currently I think that all those transactions are just people speculating on bitcoins, in July with those high prices there was just lots of speculation going on now it is slowly dieing off.

[Technomage]

How do you use that correlation to predict anything?  The fact that now the transaction count is at such and such level and that this correlates with the current price does not tell you anything with future prices - or does it?  Or do you say that the transaction count leads the price?  I don't see that from that chart alone - but if you show me I might change my opinion on this.  Currently I think that all those transactions are just people speculating on bitcoins, in July with those high prices there was just lots of speculation going on now it is slowly dieing off.

Well, you can sort of predict and sort of can't. The prediction comes simply from looking at how the graph of the declining transaction count curves down and it looks like it's leveling off. That's it. It could also be going down again after that, but that's the point where you simply have to look at what's going on in the real Bitcoin-world and stop looking at charts.

My main point was that the current price range seems to correlate with the size of the economy, that's it. Predicting how the economy will grow based on that chart is not possible I think, it simply looks like it's leveling off.

And you're right that most of the transactions are people speculating on Bitcoins. I don't disagree. But I think it's stupid to assume that the amount of real trade for good and services hasn't also shot up significantly, and now that has come down as well. This could be verified by merchants if we get their view.

Another important indicator is Google trends, which I think will correlate especially well with how much trade the merchants are experiencing.

Here is a 12 month chart: (http://www.google.com/trends?q=bitcoin&ctab=0&geo=all&date=ytd&sort=0), there is no sign of a new uptrend or anything like that and I've already said I'm not calling a trend, but the decline of google trends has leveled off almost completely. And now it's at levels high enough to sustain the current price if the correlation continues to be true.

So, to summarize again, the price is not going to suddenly drop significantly and stay there. The fundamental economy size and the interest people have in Bitcoin will guarantee a certain bottom price range for now. As for the future goes, I'm not calling anything, simply saying that what's happening in the Bitcoin world looks very promising to me.