The basics go as follows.
1. A magic line can be identified as a moving average where the asset has consistent trouble going over or under during a trending move. It will pull back and touch it once in a while, and if very oversold could bounce above it for a little bit.
2. Strong moves above or under a magic line can be considered "slicing" behavior, where bears or bulls managed to rally enough strength to overcome the lines resistance/support. such moves, if they happen out of a tight trading range, can lead to strong move in one direction.
Here I show a chart with a 20dma. Notice how whenever price is below the movign average it sometimes comes back and touchs the line. If bitcoin sells off particularly hard, say 30-50% like ti does many times in this chart, it tends to mean revert for a bit over.
The real kicker is when the line starts trending up tracking price for a while, otherwise known as basing.
A strong move out of the line shows their is some juice in the move, and that the line could potentially act as support for the rest of the trend, until it becomes overbought or oversold
Here is a number of times the 20dma proved to act as the magic line. Take special notice to may 15th 2014 and march 3 2015 july 28th can be considered a base decline.as well ast September.
Currently we could consider this trading range, 1330-1480 as a potential base, the price recently had a nice green day that sliced through the 20dma. Normally i would like to see faster action after such a move, which keep me hesistant, but I think the possibility of a BIG move in bitcoin could be around the corner if this shown here and the 20dma act jointly.
Trade Recommendation: Long with a stop at 1420 area.