Learn to trade CFDs with Tony Sycamore
Hedge your share portfolio with CFDs. Join our free webinar on 14th May.
Market News & Analysis
Is “it” back?
Tony Sycamore April 4, 2019 4:09 PM
The early part of this week was dominated by the news that PMI data in the world’s two largest economies, the U.S. and China had staged unexpected and impressive rebounds, thereby flipping the conversation from one of “synchronised deceleration” to one of “synchronised growth”.
Even for those amongst us who would like to see more evidence to support the upturn in growth theory, it’s difficult to ignore the preliminary signs that fiscal easing in China appears to be taking effect and a better growth trajectory in China should flow through into other economies, including the sick child that is Europe.
Therefore, it was always going to take something quite special to capture the attention of traders pondering just how much further the equity market rally of 2019 could extend. That diversion has come from a rather unexpected source – a stunning one day +20% rally in Bitcoin.
After grabbing headlines in 2017, as Bitcoin rallied from below 1000 to a high of 19666, the cryptocurrency market and Bitcoin has since lost approximately 85% of its value plagued by a long list of concerns. These have included fraud, manipulation, energy use, lack of market size, a lack of regulation, bans by social media giants including Facebook and Google, not to mention the lack of SEC approval to launch a cryptocurrency ETF and no major retailer adding cryptocurrency acceptance. Even one of the very core concepts of cryptocurrency is being debated. As most Bitcoin and cryptocurrencies are owned by a very small number of people, can they really be called decentralised?
That said, those passionate about cryptocurrencies can find a list equally as long, as to why blockchain and cryptocurrencies are here to stay. For example, Spanish banks and even the Australian Stock Exchange, have implemented blockchain technology in their processes.
Where do we sit within the debate? I favour the analogy whereby the current evolution of Crypto is similar to the early days of the Dotcom boom of almost 20 years ago. There will be a handful of cryptocurrencies that will flourish in time, much like E-bay or Amazon have done after the Dotcom apocalypse. More importantly though as a trader, I am constantly scouring charts looking for trading opportunities that combine a strong technical setup with acceptable risk/reward.
With FX markets mostly range bound in recent months, and after seeing little of interest in Bitcoin since the trade setup outlined here in July 2018 https://www.cityindex.com.au/market-analysis/bitcoin-finding-a-base/ Bitcoin again caught my attention 6 weeks ago. More recently we highlighted this setup and our bullish view of Bitcoin in the Week Ahead video here https://www.cityindex.com.au/the-week-ahead/.
The essence of the chart pattern was that Bitcoin was displaying evidence of a rounded bottom/loss of downside momentum on the daily chart as well as bullish divergence as viewed on the RSI. The weekly chart confirmed that at its low point, last December, Bitcoin held the support coming from the 200-week moving average.
Armed with this information we were able to initiate a long Bitcoin trade at an average price of 3925. After reaching the first profit target of 4650 far more quickly than anticipated, I remain core long looking to take profits again on a push towards the next layer of strong resistance between 5750 and 6000.
I intend to keep a final portion of the original position for a move towards 8000. The stop loss on the trade has now been moved higher to 4050. As to whether Bitcoin goes up or down after this point is irrelevant to me as one way or the other, I will be out of the current trade and moved on to the next.
Source Tradingview. The figures stated are as of the 2nd of April 2019. 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
TECH-FX TRADING PTY LTD (ACN 617 797 645) is an Authorised Representative (001255203) of JB Alpha Ltd (ABN 76 131 376 415) which holds an Australian Financial Services Licence (AFSL no. 327075)
Trading foreign exchange, futures and CFDs on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange, futures or CFDs you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss in excess of your deposited funds and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange, futures and CFD trading, and seek advice from an independent financial advisor if you have any doubts. It is important to note that past performance is not a reliable indicator of future performance.
Any advice provided is general advice only. It is important to note that:
- The advice has been prepared without taking into account the client’s objectives, financial situation or needs.
- The client should therefore consider the appropriateness of the advice, in light of their own objectives, financial situation or needs, before following the advice.
- If the advice relates to the acquisition or possible acquisition of a particular financial product, the client should obtain a copy of, and consider, the PDS for that product before making any decision.
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.