Despite the fact that volatility picked up early last week on a rally above $615, since the breakout the market has settle back into its old, stagnant ways.  We think it is a good sign for the longer term health of the market that price has been able to stay above near term support, however the technical outlook remains unfavorable for now.

Bitcoiners got more good news concerning scaling this weekend as the SegWit code has now been fully tested and is ready to deploy in the next Core update (set for mid-November). While we may not see the benefits from it until later this year or early next, this is nonetheless good news on the fundamental side of things. Moving on to the technicals, things get a bit more complicated considering there are many near term bearish indications that are currently putting a ceiling on price, and some bullish ones that are helping to keep the market elevated above the $630 “resistance turned support” level. As long as the market remains stuck between $630 – $640, there won’t be a ton of trading opportunities due to poor risk/reward profiles on both the long and the short side, however, a move out of this range will tell us where the market wants to head over the course of this week.

We can see on the updated daily chart below that price is now well above the broken symmetrical triangle, as well as all relevant near term and longer term moving averages. The 9/18 EMA cross is still in stacking mode to the upside, and the 200-day SMA is trying to flatten out and reverse higher around the $600 level. This area is also where a secondary volume profile point of control (PoC) sits, as well as a notch in the pivot zone, so we would not be surprised to see a retracement back down there prior to an eventual resolution up and out of this extended $450 – $700 bull market consolidation range. This notion is being confirmed by the momentum oscillators which are all officially overbought and slightly bearishly divergent.

Finally, notice that we have a large OTE short zone just overhead between $660 – $710 so this is the region where we expect the next pause to take place if the bulls can push price over the $640 – $650 resistance area over the next few days. $680 – $700 seems like a reasonable upside target in case things do begin to move that way, while the triangle apex and primary volume profile PoC in the $580 – $600 area should act as a magnet if sellers begin to move in before price gets back above $640.

Bitcoin price chart

Given the current situation, we think it’s wise to stay neutral and nimble until the market gives us a clearer signal as to which way it wants to proceed as we move into the latter part of October. From a technical perspective the retracement scenario seems to be slightly more likely due to the extended nature of many momentum indicators, although volume is still siding with the bulls for the time being. We will lean with the bears for now, although if the $642 Bitstamp high is broken on volume then we should be looking at price over $650 in a short order.  

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