Bitcoin Breaks Out – More Gains Likely

By Fx Livermore

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After a prolonged period that saw bitcoin prices moving back and forth with no clear direction, everyone’s favorite cryptocurrency just staged an upward brakeout. The moveup were preceded with a month long range that started with BTC/USD moving aimlessly between $450 and $410, only to late constrict to a smaller $5 range in the days before the brakeout. The rally started just as prices cleared the $440-$445 resistance area. Within a day, the crypto broke the $450 mark (BTC-E) and came close to the important psychological $500 figure, reaching a high of $487.77 on BTC-E and $500 on BitStamp. We are currently trading just below this figure on Stamp and at $487.96 on BTC-E. The 4 Hour chart below (BTC-E) shows the impressive rally during the last 24 hours.

Where are we going from here?
The rally is likely to continue in the days to come, although given the vertical nature of the recent price climb, BTC may try to consolidate before making another run for the $500 figure. The downward sloping trendline that underpinned the fall during the last few months is now clearly broken as indicated on the chart below.

The levels to watch to the upside include the psychologically important $500 figure, followed by the swing high at $544.99 made on April 16^th. If this area is cleared, we’ll be looking at the resistance at $700, followed by the January 6^th swing high of $989.99. The all-time high of $1090 (on BTC-E) concludes our list of possible resistance points on the way up. Naturally, large round numbers like $800, $900 and especially $1,000 are also worth keeping an eye on.
To the downside, the closest low that needs to be broken in order to invalidate the latest rally stands at $426, although a break of $411 would be better. Above this, the $450 figure, followed by the brakeout point of $440 should provide support in case prices decide to take a breather. Below $411, the multi-month low of $342 stands as possible support, closely followed by $300. Further down, the highest high for the first half of 2013 at $266 will be a major support, which if broken, may send bitcoin prices into a longterm bear market. For now however, given the recent price action, a move to the upside seems like the most likely scenario.
No known fundamental catalyst
One of the factors that casts some doubt on the sustainably of the recent rally is the fact that there has been no major news catalyst. For example, the last bitcoin rally in December was underpinned by positive U.S. Congressional Hearings on the virtual currency as well as increased market adoption in China. The last multi-month bear market can mostly be blamed on the increasing hostility of Chinese Authorities toward Bitcoin . This situation can of course change at any moment. During sustained market rallies or falls, it’s not unusual to find out the ‘’real reason’’ for the brakeout long after prices have already made their move.