After testing the $200 critical support point, the price of bitcoin dropped today to around $170, before rising up again to $191 at the time of writing of this article.
By drawing a trend line between the high reached on the 3rd of December, 2013 ($1177) and the low reached on the 10th of February, 2014 ($102) and plotting the Fib Speed Resistance Fan on the daily BTC/USD charts, we can see the price bouncing off the 0.61 fan line in last October (the red circle on the above chart) and as of today, the price touched the 0.5 fan line (the blue circle on the above chart) , which is considered a support point, so the trend can reverse and we can see the price increasing shortly; however, with the market’s high volatility, the price can drop even more to the next support level ($160), so one should withhold investing in long positions, until sure signs of reversal of the downtrend are observed. Signs of reversal of the current downtrend can include the following at this point:
- An upward sloping of the On-Balance Volume (OBV) oscillator curve. Right now, the OBV oscillator is sloping downwards (look at the below chart) which means that the selling power of the market is quite strong. Usually, volume proceeds reversal of the trend, so we should see reversal of the OBV oscillator curve, before we can see an increase in bitcon’s price.
- A rapid increase in price with 4 or more open candles, before a closed candle can appear on the 1 hour charts.