In previous reports, we had mentioned that a $400 breakout would lead to another rally to test $500. Last week we had a $400 breakout on a bull pennant. Prices chopped for a bit but then tested and broke $450 and 3000 CNY for some aggressive $25 gains.
Bitcoin volume increased and became over extended before hitting a peak at $475 and dumping hard to retest $400 support. The bull trend is still intact as we slowly creep our way up to prior $475 resistance and ultimately $500.
There was a massive bear flag forming on the retracement of that $70 dump. This usually leads to more downward pressure. There were smaller dumps once we retraced to the 50-61.8% fib levels but not nearly as big as I was anticipating. These dumps were well absorbed which makes this market bullish.
The key area of focus now is $475 USD and 3130 CNY. It’s possible we’ll meet strong resistance and dump again. Alternatively, prices could have a breakout and test $500.
The Importance of $500
The $500 level was a magnet area when prices were in a previous trading range between $250-$1000. It is a nice round emotional level that has as much significance for traders as $1000.
A breakout above $500 could lead to quick gains that test previous all time highs. This level acted as very strong resistance on last month’s rally.
If the trend continues to stay healthy without getting overbought, many traders will be looking to catch a $500 breakout trade. This may push prices up fast.
2015 started with the Bitstamp hack and a large dump down to $166 USD. Throughout the year, prices consolidated between $200-$300.
$250 was our magnet area and $300 was tested on 3 separate occasions before the major breakout. Our weekly reports have been indicating the importance of a $300 breakout to end the 18 month bear cycle.
A few months ago, prices broke past $300 on high volume and eventually had a parabolic spike to test $500. The markets came crashing back down to retest $300 support. The bounce off of $300 showed the uptrend was intact.
Looking at the 1 week chart, we can see that the drop down to $300 was just a correction and that the charts are still trending upwards.
In 2016, I’m expecting a test of $1000 resistance. The first test of $1000 will likely be met with heavy selling pressure, as previous 2013 bag-holders will be looking to regain losses.
Should Bitcoin continue on its 6 year trend, expect to see new records breaking the previous all time high. 2016 looks like a good candidate because of the halving of bitcoin block rewards down to 12.5 coins.