Bitcoin Technical Analysis Was on the Mark

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On the basis of technical analysis of bitcoin’s price and volume behavior, a sell signal was evident on 12/2/2013 at a price of $1140. After that date, bitcoin has sold as high as $1,230 and as low as $576. Its last price was $826. That’s strong evidence of a correct forecast from the technical analysis interpretation.

Before rushing out to study technical analysis, be warned that success at its use is uncommon. There are literally hundreds of proposed ways to analyze past price patterns and volumes, and there are many thousands of people trying it and not succeeding. Many of these publish their forecasts on the internet. The results are no better than chance overall. Some of the methods are extremely complex and obscure. One can invest a lot of time and money to no avail.

Clearly one has to learn which methods work and which do not, and one must learn the skills of money and emotion management to apply those that produce results better than chance. Patience is one of the skills. One cannot make opportunities occur in speculative markets. One has to wait until they appear. They appear infrequently. You will find that most internet analysts are almost constantly looking for tops, bottoms, buy and sell points, and thinking they are discovering them frequently. Markets do not deliver these opportunities that easily or frequently in my experience. It takes time for them to develop. Market price movements almost never occur at our convenience or in ways that make it easy for us to understand. Attempting to explain them or understand them by popular information releases or by appeals to manipulation are fruitless.

Technical analysis coordinated with a fundamental analysis of value versus price can be better than either of these by itself.

Whatever methods one may find that work, it has been my experience that they be quite simple and that they have some reasonable rationale. Complex technical analysis methods do not help to forecast speculative price movements.

To my way of thinking, a speculative price at a given time has to reflect every thing that anyone has seen fit to trade upon at that instant. Markets always fully reflect all information. The resulting price, however, need not be a “correct” price in the sense of reflecting a “fundamental” value. There can be hidden profit opportunities at that price.

6:39 am on December 7, 2013