Market News & Analysis

Top Story

Bitcoin to show its metal?

The weekend can’t come quickly enough for stock markets which last week were trading at all-time highs. The correction that has unfolded over the past five sessions has been more savage than expected and a reminder how markets traded during the Global Financial Crisis (GFC) day after day, week after week, month after month.

Thankfully markets are a long way away from experience anything like that type of sustained GFC panic. However, the fear of the unknown surrounding Covid-19 is unsettling markets and main street alike.

This is likely to continue until key Central banks show a willingness to deliver the rate cuts/stimulus that stocks need to rebound. As history shows, it’s much better to be on the side of central bank easing measures when they inevitably come.

In the meantime its more about weathering the storm. In this light, Bitcoin is catching the eye as other safe-haven assets such as gold are caught in the cross asset position wash.

Casting our mind back to the end of last year we were vocal in calling for Bitcoin to rally from its December low and suggested a long Bitcoin trade to benefit from this view. This worked well for us, the only frustration being Bitcoin rallied further than anticipated.

Since that point, I have been waiting patiently for a pullback in Bitcoin to re-enter longs. The retracement from the February 10500 high has now reached an interesting junction, the support offered by the 200 day moving average, 8750 area.

The ability to post a daily close above the 200 day moving average and the formation of a bullish reversal daily candle is a positive development. However, to confirm the uptrend has resumed and as the catalyst to open longs, a break/daily close above the resistance 9000/9200 area is needed.

This would then target a test and break of the February 10500 high, before 12,000 and would also go a long way to negating the possibility that Bitcoin is tracing out the right shoulder of a larger inverted head and shoulders pattern.

Bitcoin to show its metal

Source Tradingview. The figures stated areas of the 28th of February 2020. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

From time to time, GAIN Capital Australia Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.