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Bitcoin's Big Run: No Such Thing As A Triple Top?

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Bitcoin's Big Run: No Such Thing As A Triple Top?

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

The PreMarket Prep Show covers stocks, but futures are also discussed on a daily basis. With a breakout in Bitcoin today, finally clearing the $20,000 hurdle, it's the PreMarket Prep Mover Of The Day.

The price action discussed in this article will be based on the rolling front-month contract futures contract on the Tradestation platform. For those who don't dabble in the cash market or futures, its price action can be tracked by the Greyscale Bitcoin Trust (OTC: GBTC).

What A Year: After ending 2019 at $8,545, Bitcoin flirted with the $12,000 level in February by peaking at $11,890, and then came COVID-19. While the S&P 500 index didn't find a bottom until March 23, Bitcoin bottomed at less than 50% of its year-end closing price on March 13 at $5.315.

That low coincided with a pair of monthly lows from January ($5,375) and February ($5,386) and just above its December 2018 low of $5,170.

As of 11 a.m. ET, the issue is now attempting to trade in a $21,000 handle for the first time ever, nearly a 300% gain off the March low.

screenshot_2020-12-16_at_11.06.17_am.png

Catalyst, Bullish Scenario: Besides being a popular trading vehicle for momentum investors, many attribute the rally to the depreciation of the U.S. dollar. In other words, Bitcoin is now considered a viable alternative to gold and silver as a hedge against further weakness in the U.S. dollar or rising inflation will which eventually creep into the U.S. economy.

For a more detailed explanation of the rise of Bitcoin, long-time bull Mark Yusko of Morgan Creek Captial Management appeared on the PreMarket Prep Show on Nov. 11 to detail his bullish scenario for the currency. Bitcoin futures ended that day's session at $16,065.

No Such Thing As a Triple Top: A common, but not 100% accurate statement amongst the followers of technical analysis is “there is no such thing as a triple top.” What is meant by this statement is that trading vehicles may put in double tops, but the chances of an issue breaking out on the third attempt is a more likely scenario.

After peaking on Nov. 30 at $20,260 and on Dec. 1 at $20,360, Bitcoin made its third and final attempt during today’s PreMarket Prep Show and busted right through it.

The actual breakout in the issue was captured live on today’s PreMarket Prep Show during the interview with the serene Anne-Marie Baiynd, the author of Thetradingbook.com.

Moving Forward: In this market environment, it's impressive to call a top in anything. Investors that are long Bitcoin or its equivalents and have not their price targets should abide by their original gameplan. If looking for more, it may be prudent to have in mind a potential area to exit if the issue reverses course.

Also, round number areas such as $21,000, $22,000... or $30,000 may provide for some temporary psychological resistance in the issue as it enters uncharted waters.

Disclaimer: Dennis Dick is long shares of the Bitcoin Fund (TSX:QBTC.U), the Canadian equivalent of the Greyscale Bitcoin Trust.

 

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