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Bitcoin Downside Targets

|Includes:Apple Inc. (AAPL), BMC, CHK, CLH, CMG, DMND, GMCR, HLF, PCLN, RGLD, SLV

After seeing a discussion of Bitcoin on Bloomberg (found here) we decided to run Edson Gould's Speed Resistance Lines (SRL) on the "currency."

(click to enlarge)Click to enlarge

The most important feature regarding this SRL analysis is precedence. Without precedence we could not ascribe any amount of confidence to what is in the chart. Of course, the precedent that we're referring to is the peak in the price near June 2011. At that time the peak price was $31.90. Based on the SRL for that period, the conservative downside target was $17.24 and the extreme downside target was $10.36. In each case the price of Bitcoin declined below both level and on a resounding basis. The ultimate low after that parabolic peak was $2.30 in late December 2011, a decline of -92.78% from the peak.

Because the nature of parabolic peaks is to crash disastrously explains why the more moderate peaks of January 2012 and July 2012 did not give up more than 66% of the previous increase. The current parabolic increase in Bitcoin has a conservative downside target of $89.45 and an extreme downside target of $76.05. However, if Bitcoin were to experience a -92% decline as it had done in 2011 then there is the potential for a decline as low as $16.45 which is slightly below the technical base of $21.10.

While technical analysis is considered voo-doo at best, we are trying to determine the limits of Edson Gould's SRL. So far, Gould's SRLs have given accurate downside targets for Apple (NASDAQ:AAPL), Green Mountain Coffee Roasters (NASDAQ:GMCR), Herbalife (NYSE:HLF), Chesapeake Energy (NYSE:CHK), BMC Software (NASDAQ:BMC) and Silver or iShares Silver (NYSEARCA:SLV). This is 54% of all the SRLs done on our site.

There are two SRLs that are still on their way to providing an accurate downside target and that is Randgold (NASDAQ:RGLD) and Philadelphia Gold and Silver Stock Index (XAU), 18% of the SRLs run.

Twenty-seven percent of SRLs that have failed are Priceline (NASDAQ:PCLN), Chipotle Mexican Grill (NYSE:CMG) and Clean Harbors (NYSE:CLH). All of the SRLs and their success and failure can be (found here).

Note: Diamond Foods (NASDAQ:DMND) has been excluded from the SRL count since DMND was done after the downside targets were achieved.

Stocks: AAPL, GMCR, CHK, HLF, BMC, SLV, RGLD, PCLN, CMG, CLH, DMND