Bitcoin Analysis: Week of Oct 12 (Don’t Blame the Bearwhale)

Note From the Author: This will also be a slightly different than usual report due to finally being able to catch up after speaking at Inside Bitcoins Vegas Conference Oct 5-7 and also the CoinAgenda/BitAngels event Oct 8-9. This was one of them most exciting weeks in bitcoins volatility so to all the readers that are now consistently following this series, you are encouraged to follow me on Twitter (@Tone_LLT) where I would attempt to put up a chart and some thoughts every few days.

Last Week’s Review

In last week’s post we concluded with the following statement:

Our overall stance remains Long-Term Bearish (with still limited downside), Intermediate-Term Bearish, but for the 3rd week in a row we are flipping Short-Term to now be Bullish. The previous 2 weeks worked out as planned so let’s see if this week is kind to the arrows on the charts. The overall picture still remains very weak for any meaningful reversal at this time. The highest probability move right now is a rebound back to the US$400 area. Even if the price breaks down this weekend into the US$340-350 zone, the fact that it’s oversold still allows for a move from US$340 back to US$400.

We will also remain diligent of the following situations listed in order of importance.

Bearish: In case prices break down bellow the US$340-350 zone, it would most likely go down to the US$260 area with the round number of US$300 perhaps slowing down the slide a bit.

That was written around 4 AM ET Saturday before getting on the plane from NYC to the conferences in Las Vegas a few hours later. One of the disadvantages of analyzing this very volatile market is that it is also 24 hr so no matter when you plan your flights, there is a chance of missing one of biggest moves of the year. So let's go over what happened.

The big news of course was the BearWhale after an initial fall a day or so earlier. The massive sell wall created at US$300 eventually chipped away and there was a great rebound all the way back to just under US$400. For those who were expecting a move from US$350 to US$400 did eventually see their target hit in less than a week but it came at a massive price of watching a crash down to US$275. The price reversed from just above the bearish target implied in our ‘Bearish’ scenario so the big question is – have we finally bottomed for the year?

Also for the regular readers of this series, it is encouraged to follow the twitter feed and even though such a sudden fall came as a surprise to everyone, those that invest wisely and were not in danger of Margin Calls could have stayed calm. Here are the tweets from Vegas about possible expectations.

#bitcoin took an unexpected hit, still expect the $380-400 rebound mentioned last week $BTCUSD watch RSI & $305 low 

— Tone (@Tone_LLT) October 8, 2014

#bitcoin has reached lowest target at $380 but now RSI overbought, a little break would be nice $BTC $BTCUSD: Bullish 

— Tone (@Tone_LLT) October 9, 2014

#bitcoin is hitting resistance at $400, it can break out but a healthy uptrend would fall to $340 or so first $USDBTC 

— Tone (@Tone_LLT) October 9, 2014

#bitcoin showing first signs of reversal, the RSI is back calling turns along with horizontal sup/res $BTC $BTCUSD 

— Tone (@Tone_LLT) October 10, 2014

Please keep in mind that this series is not meant to create a following of traders looking to do exactly what is suggested. Following someone you do not know is a recipe for disaster. It only works in situations where you have a direct line of communication and are not glued to a computer screen waiting for an update. It is intended for those who are interested in learning how some traders do it and most importantly to manage expectations so that when prices suddenly drop to a very realistic value of US$275, a person holding bitcoins is not in a panic. In fact, the readers of this series might actually consider the drop not as bad as expected since it stayed about US$10 higher than the April 20