BITCF Stock: Caution Is Warranted
I have been silent on Bitcoin since my views were published on this cryptocurrency on January 5 of this year when Bitcoin was trading at around $1,006. The publication was titled “The Bitcoin Price Bubble Is Far from Over,” and I clearly stated that although I think that Bitcoin is a complete farce, I still had the inclination to believe that much higher stock prices were on the horizon. In fact, I clearly stated in that publication that I could easily see the price of Bitcoin surge past $4,000 before the bubble that is being formed finally bursts. This level was just crossed this weekend, and appropriately, it’s time to revisit the madness that is currently surrounding Bitcoin.
The madness is starting to resemble the dot-com bubble that I was fortunate to experience firsthand in 2000. This madness is why I am focusing on FIRST BITCOIN CAP COM NPV (OTCMKTS:BITCF) stock. This company was once called Grand Pacaraima Gold Corp before it changed its name and line of business in 2014. I saw something quite similar in 1999, where a number of gold mining companies transitioned into Internet companies. The resemblance is uncanny, and at that time, it served as the precursor to the final stage of the dot-com bubble.
At this juncture, caution is warranted, and only professional traders should be trying to enter and exit this hot market. That is not to say that there are not opportunities being presented. For example, BITCF stock has appreciated to the tune of 682.85% in a matter of six days. This opportunity did not appear out of the blue, and in fact, there was price action on the First Bitcoin Capital Corp stock chart that was suggesting that a move was in the making.
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The following First Bitcoin Capital Corp stock chart illustrates the price action that was suggesting that a price move was in the making.
Chart courtesy of StockCharts.com
This BITCF stock chart has been highlighted in order to focus on the waves that create constructive price action.
Constructive price action consists of an alternating two-wave structure that creates the necessary building blocks in order to create a trend. The structure consists of impulse waves, which are highlighted in green, and consolidation waves, which are highlighted in purple.
The impulse wave defines the stage in a trend where the stock price stages a sharp and swift advance. The consolidation wave defines the stage in a trend where the gains from the previous advance are digested in order to alleviate any overbought conditions. Alleviating an overbought condition sets the stage for a new impulse wave to develop.
The consolidation wave that preceded this incredible run was a triangle pattern, and readers who follow my work know that this pattern is known for its explosive breakout. In this instance, that is exactly what occurred on a magnified level.
On August 7, BITCF stock exited the consolidation wave and a new impulse followed. The run has been impressive to say the least, but now there are metrics that are suggesting that a correction is in order.
The following BITCF stock chart illustrates the indication that is suggesting that the stock price has run a bit too far, too fast.
Chart courtesy of StockCharts.com
The focus of this BITCF stock chart is the indicator located in the upper panel labeled “RSI.” RSI stands for relative strength index, and this oscillator is used to distinguish whether an investment is overbought or oversold.
An RSI oscillator reading above 70 is considered overbought, while a reading below 30 is considered oversold. There are numerous ways one can use this indicator to generate signals, but under these circumstances, I am using this indicator to outline extreme levels of relative strength. This indicator currently sits at 96.59, which is extremely overbought. Just to clarify, anything above 90 is an extreme reading that is unsustainable, and a correction from these levels seems like a certainly.
I have highlighted previous readings above 90 to illustrate that the move towards higher prices stalls once the 90 level is breached. On the previous two occasions, which are highlighted on the First Bitcoin Capital Corp stock chart, a substantial sell-off did ensue. Both instances saw BITCF shares drop by 50% or more, which is significant and substantial. The only solace I can offer is that these sell-offs were only corrections and eventually higher BITCF stock prices prevailed. Either way, an RSI reading above 90 is reason for concern, suggesting that a correction is set to ensue, which warrants a cautious stance.
Bottom Line on BITCF Stock
Bitcoin is creating waves once again, and the mania surrounding this sector is spreading into other instruments. First Bitcoin Capital Corp stock soared by 682.85% in a matter of six days. There are indications on the BITCF stock chart suggesting that the run has reached an extreme level and caution is warranted because a sharp correction is now expected to follow. Once this correction plays out, perhaps I will take a second look as the bubble in Bitcoin continues to build.