There have been several technical developments that suggest a bottom is in. The question at hand is when and where to make the buy. The Fed meeting on Dec. 19 and the Ethereum hard fork in January are likely scary events that may provide opportunities.

Overnight, savvy readers and the Crypto IQ trading desk found some interesting articles indicating extreme bearish sentiment. Zerohedge reported the following headline, “CNBC’s Crypto ‘Uber-Bull’ Brian Kelly Capitulates, is Now Short Bitcoin.”

The New York Post reported this headline on Dec. 17, “One of the first crypto millionaires says Bitcoin (BTC) is ‘dead.’” This past weekend, the Financial Times’ blog, Alphaville, published an article called “The Bitcoin price is wrong.” That article itself was pure FUD which is shameful for a publication like FT.

These extreme sentiment readings published just before the market took off are very powerful signals. Based on these and other technical readings, the case for a bottom in Bitcoin (BTC) is strong.

Looking at an intraday chart, it may be wise to be patient and go with any rally above $3,636 in Bitcoin (BTC) on Bitmex (XBTUSD). Yesterday’s rally took Bitcoin (BTC) on Bitmex near what Elliot Wave practitioners call a “previous fourth.” The level is $3,626 (Figure 1).

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After a big downtrend, it makes sense for a market to a retrace to this kind of level. It is the level where the final down move started.

If Bitcoin (BTC) on Bitmex goes above this level, go with it and start buying dips. Optimally, there would be a break of $3,626 and then a dip back to that level. If the $3,626 held as support, that would be better confirmation.

If there is a confirmed breakout above $3,626, a move to a high volume zone near $6,300 becomes possible. Bitcoin (BTC) went down really fast, and it could be back up the same way (Figure 2).

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Bottom Line: Bitcoin (BTC) still has some work to do on the upside. The case that Bitcoin (BTC) has made a bottom is much stronger than we originally thought. Short term traders should stay disciplined and follow the direction of the Crypto.IQ trading room. Longer term players can likely start dollar cost averaging. The bet is that talk of targets of $2,500 or lower were just bearish hyperbole. Also, a U.S. Dollar top may be imminent. That could further help Bitcoin (BTC).