MCR Market Report

The Leader in Quantitative Analytics

Bitcoin Technical Update for 2 April 2018

02 April 2018 5:11 PM | MCR Market Report (Administrator)

It's been a while since we've posted a deeper look into the variety of indicators we use, so we thought we'd take the time to do that today.  At its most basic level, Bitcoin has just undergone what is termed a "death cross", defining that the 50-day simple moving average of prices has just declined under the 200-day moving average.  We point this out only for completeness sake because, we assure you, that buying simply on a 50-day MA crossover above a 200-day MA and selling on the opposite is not profitable when looking at Bitcoin or almost any other investment for that matter.  


Another charting technique we look at is known as Cloud charting.  Stockcharts.com provides a pretty good explanation of this technique available here.

Looking at the cloud charting, it is also bearish with the price of Bitcoin trading below the cloud (the blue and pink shaded areas), along with the lagging line (solid blue line), that is also below the cloud.  Cloud charting is also a good longer-term chart analysis that should keep you on the right side of the trade overall.  


In addition, we analyze point-and-figure charts.  Point-and-figure charts have stood the test of time being used by traders on Wall Street for over 100 years.  The continued practice of PnF charts today is a testament to their usefulness.  The MCR Market Report is the only source of this valuable charting technique available to retail/individual traders today.  Point and figure charts are simply column's of X's and O's, defining uptrends and downtrends, respectively.  The multiplier is the number of boxes that must "retrace" before an up column of X's turns into a down column of O's.  Traditionally the multiplier is set to 3 times the box size, however it can be any integer the analyst chooses.  The MCR Market Report uses percent change box sizes in its Point and Figure charts as it presents a true price comparison throughout the entire data set.  Let's take a look at a simple point and figure chart of Bitcoin:


We'll point out a few things of interest here.  After hitting over $20,000 last year (note the price target that was indicated in March of 2017! predicting that move), Bitcoin has been in a rather steady downtrend with a handful of retracements.  We admit to being "tricked" a handful of times since then going long into the rebound, only to be stopped out when prices reversed.  Overall, we have avoided the brunt of this downtrend.  The second item of interest is that Bitcoin has consolidated at around $6900-$7000, almost precisely where it bottomed in trading in February.  This price level is also close to a long-term point-and-figure trendline that is currently at around $6200.  This area should be considered very strong support going forward.  Although also of note, there are two downside targets at $5133 and $5393.  So unfortunately, while there is some bullish hope based on the fact that we haven't broken through February's low, the majority of indicators still indicate weakness going forward.

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