Bitcoin Bearish Momentum Still In Play
Ben Myers | Dec 10, 2014 04:31AM ET
Price action pushed Bitcoin (BTC-eUSD) lower, almost touching the $340 level. However, buying pressures brought the price back above key support.
Prices were bid higher and managed to close above the third weekly resistance at $350.42. Prices currently stand at $352.99 on the BitStamp exchange, down $8.31 or -2.30%. This could just be a slight correction before the bearish momentum pushes prices even lower. If support at $350.42 is successfully broken this week, then prices could drop to as low as $330, where the next Fibonacci support lies and is the first monthly support level.
The New York tax authority has exempted Bitcoin purchases from sales tax with a memorandum stating that Bitcoin and other crypto-currencies are to be considered ‘tangible property’. However, corporate and income tax issues regarding Bitcoin still apply, where it is liable for these types of taxes in the U.S. The E.U. is still grappling with these issues and has yet to take a firm stance either way.
The chart below shows the daily price action, which has broken below the Ichimoku cloud through the thin region. This is a strong bearish signal, which has additionally been accompanied by a lagging line moving from above to below the previous price action. Both of these signals confirm a downward trend, so it is expected prices will head even lower. Furthermore, the cloud projected forward has turned red, which should act as resistance in the coming weeks around $375-$385. Bearish momentum is still in play as indicated by the base line being at a higher level than the conversion line.
The chart below shows the hourly chart, along with the Ichimoku cloud and relative strength index. The large green candle indicated buyers managed to pull prices back higher, but the downward momentum remains intact. The relative strength index peaked just below 50 then dipped lower. If the relative strength index continues to fail to break above 50, the current trend will remain intact. The Ichimoku cloud indicates possible areas of future resistance, around $363 and $353. A close above the base line, which is currently at $356.49 will signal bullish momentum and the price should tend toward the cloud. Alternatively, the RSI and price action could dip lower, and repeat testing the key support level at $350 and reinforce the downward trend. The RSI is currently at 42.16, suggesting that the price can fall further before tending towards the cloud, as the market is not oversold yet.
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