Forex Signals

BTCUSD: Consolidation after double bottom

Bitcoin made a high-volume bullish candle after a double bottom touching the lower edge of its bullish channel. After bouncing off of its 200-SMA has created a consolidation channel in which you see two engulfing candles, after a bounce from the 50% level of the initial bull candlestick.

On the other hand, the Stochastic RSI indicator is in its lower side of the range, ready to make a crossover to upper levels. Thus, instead of waiting for the $9,300 break, we could test the strength of the market and make a spot order at the current levels with a relatively tight stop 100 pips under the current level and see if the strength shown continues.

The channel shown is a linear regression channel, with the edges separated + and – two sigmas from the real regression line. Thus a bounce off the -2-sigma edge means a value buy and a progression towards the consensus, or fair price, which is represented by the regression line shown in dotted gray/red. This action is a high probability event in this kind of mean-reverting market, such as is happening with Bitcoin. Moreover, the trade goes with the main upward trend. Thus the target is set conservatively below that level, at 9,740.

The levels

Buy entry: 9,203

Invalidation level: 9042

Profit Target: 9,741

Risk: $100 on each BTC purchased

Reward: $540 on each BTC purchased

Reward/Risk: 3.34