Bear Flag Consolidation

[arepo]

http://s30.postimg.org/cs0v68alt/bearflag.png

right now we're seeing a beautiful triangle consolidation pattern after the small slide, and the big question is... what's coming next? gox data shows a symmetrical triangle, and bitstamp is forming into a descending triangle.

well when's coming next is always an easier question to answer, so by some rough geometrical calculations (white rectangles) we can expect a breakout in less than 65 minutes of 10:20 EST.

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1-month 2-hour scale @ MTGOX


http://s21.postimg.org/btryd8693/triangle06jan.png

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unfortunately for the bull case, a moving support visible in both the Slow Stochastic Oscillator, and, to a lesser extent, the William's Oscillator shows a bull run that is running out of space. this moving support is quite robust in the Slow Stochastic with 5 - 6 points of contact!

what this means is that either the triangle will break downwards, ending the mid-term trend that started after the last capitulation, or we may break upwards and test the $1100 resistance again. however, the oscillator data suggests that we may not have the momentum to break through and would likely form a double top, thereby ending the uptrend as well.

in short:

scenario bear: break downwards, capitulation event or downtrend to no lower than $600.

scenario bull: break upwards, retest $1100, likely rebound. there is a possible cusp top scenario because of all you irrational bulls where we break through the $1100 resistance and retest the ATH, but this is not likely and we will almost definitely not see another ATH before a capitulation event.

--arepo

I work diligently in my analysis, and share it with you as I can. If you learn from me, help keep it free!
18N9md2G1oA89kdBuiyJFrtJShuL5iDWDz

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[arepo]

of course, by the time i wrote that up, we'd already broken into a larger, descending triangle on MtGox.

the scenarios outlined in the OP are still relevant, but the "breakout clock" has been reset: <155 minutes from 10:47 EST

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http://s10.postimg.org/3metuanqx/newtriangle.png

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--arepo

[T.Stuart]

Please also be aware that we have seen a mountain of clear evidence that technical analysis of the sort practised by Arepo and others, while being valid for cerain markets, has proven time and time again to be ill-suited to Bitcoin.

Please pay attention to the green line on the chart below. It represents a normal, healthy continuation of the clear uptrend we have all been seeing over the past two weeks. There is fundamentally no good reason for Bitcoin to fall below this line.

Please remember this after consolidation has happened around this pattern. Do your own common sense analysis; don't rely on an expert without thinking for yourself first and foremost.

[MatTheCat]

Please also be aware that we have seen a mountain of clear evidence that technical analysis of the sort practised by Arepo and others, while being valid for cerain markets, has proven time and time again to be ill-suited to Bitcoin.

Its fundamentally happening though T.Stuart whether you like it or not.

[NamelessOne]

Please also be aware that we have seen a mountain of clear evidence that technical analysis of the sort practised by Arepo and others, while being valid for cerain markets, has proven time and time again to be ill-suited to Bitcoin.

Its fundamentally happening though T.Stuart whether you like it or not.

Yes the triangles he pointed out were in play, I was watching them closely and acted upon them. Came to the forum and saw this thread as they started to break down.

[arepo]

Please also be aware that we have seen a mountain of clear evidence that technical analysis of the sort practised by Arepo and others, while being valid for cerain markets, has proven time and time again to be ill-suited to Bitcoin.

Please pay attention to the green line on the chart below. It represents a normal, healthy continuation of the clear uptrend we have all been seeing over the past two weeks. There is fundamentally no good reason for Bitcoin to fall below this line.

Please remember this after consolidation has happened around this pattern. Do your own common sense analysis; don't rely on an expert without thinking for yourself first and foremost.

i do hope you realize how terribly hypocritical your above post is...

anyway, let's take this apart a bit:

Please also be aware that we have seen a mountain of clear evidence that technical analysis of the sort practised by Arepo and others, while being valid for cerain markets, has proven time and time again to be ill-suited to Bitcoin.

false. i have calibrated my methods specifically to Bitcoin price behavior over the course of the last two years and would recommend that they, contrarily, not be used in other markets.

Please pay attention to the green line on the chart below. It represents a normal, healthy continuation of the clear uptrend we have all been seeing over the past two weeks. There is fundamentally no good reason for Bitcoin to fall below this line.

citation badly needed

Do your own common sense analysis; don't rely on an expert without thinking for yourself first and foremost.

...as you ask your audience to kindly take seriously a chart which you scribbled a line across and made a blanket proclamation about the long-term future of bitcoin price

no offense to you, Stuart, but don't post this kind of stuff in my thread. you may well start your own, if you believe there is an audience whom it would behoove, but you shouldn't really come in here, take a crap on my original and rigorous work, and then present a chart that you have posted so many times before it is almost spamming, all the while condemning the practice. c'mon now.

this isn't a contest of bitcoin to the moon or bitcoin death, there's no need to be confrontational. we're going to see some healthy capitulation, shake out all the weak hands, and continue the heretofore undisturbed infinite bullrun i like you T, we don't need to be enemies

--arepo

[pera]

still going to the moon

[arepo]

still going to the moon

i see your trends. the main problem with trendlines is that they work up until they don't. spotting tops and bottoms is still very important. working off of the scenarios i outlined in the OP:

scenario bear: break downwards, capitulation event or downtrend to no lower than $600.

scenario bull: break upwards, retest $1100, likely rebound. there is a possible cusp top scenario because of all you irrational bulls where we break through the $1100 resistance and retest the ATH, but this is not likely and we will almost definitely not see another ATH before a capitulation event.

cross this with another good view from the William's Oscillator and the Money Flow Index:

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1-month 6-hour scale MTGOX


http://s28.postimg.org/vkq3j76ot/bearbullscen.png

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the bullish scenario, which corresponds with your trendlines as well, mark this as simply a short-term correction, as we were rising quite far above the moving support over the weekend. that would look like the green line on the William's Oscillator, which actually shows a strong uptrend with some momentum left.

the bearish scenario is suggested by the red line on the Money Flow Index. the data suggest a moving support that is far, far lower and our little slide this morning may be the beginning of a deeper, mid-term correction.

*just a note on the interpretation of the data: while the two oscillators do look similar, the William's Oscillator is much lighter, meaning that smaller price movements produce larger movements in the oscillator data (this is an artifact of the different formulas and different calibrations). this is why the Money Flow Index suggests a mid-term correction; in order to reach the slightly lower trendline, a much larger downward price movement is necessary.

--arepo

[quone17]

I appreciate your posts and the serious use of TA here.  Seems to be pretty impartial too, which is rare on this site!

[arepo]

I am really enjoying your posts arepo.

I appreciate your posts and the serious use of TA here.  Seems to be pretty impartial too, which is rare on this site!

i appreciate your appreciation! not having enough spare capital to do this for a living has been a real killer for me, so i'd appreciate any contributions to the address in my signature if my work has helped you learn, or profit, or both!

keep an eye out for a mid-term price report which should be prepared for sale this week.

--arepo

[oda.krell]

Good post, arepo.

I'm sceptical of flags in BTC land, so please forgive me if I don't put too much weight behind that. Other than that, you analysis is solid, as always.

Of course it doesn't answer _the_ question that's on everybody's mind: is the larger (post-1200) correction over or not? For fairness sake, I don't expect you to answer it... in fact, I'm wary of anyone who claims he can answer it. I believe the best way to play the current market is to determine your long term price assumptions and your willingness for risk, and then trade (or not trade) accordingly the smaller swings, aiming to ride the bigger wave in the process as good as possible.

Anyway. So far, I'm not that impressed by the current downtrend. Critical levels to watch are 915 (mtgox), the volume weighted median of the first major swing of this correction, and 900 (mtgox), 6h EMA30 that has proven extremely reliable in the past few months (if read correctly). If those are broken and price closes below, I'll think about selling some. Volume-wise, the situation is inconclusive: 2h CMF is stable and positive on mtgox and bitstamp, which is a good sign, but bid/ask ratios are falling like rocks across major exchanges.

All in all, I'd say it's more likely we haven't seen the end of today's downtrend yet, but I'm not quite ready to declare our mini-rally, that started a few days before christmas, dead quite yet.

[Its About Sharing]

[RyNinDaCleM]

Some perhaps, but it's clearly not a wedge regardless of the outcome. Just because it has converging trend lines does not make it a wedge. Same with the recent rise. People were calling it a wedge but it has absolutely ZERO wedge characteristics.

[arepo]

[img snip]

yeah... that's not a wedge unless the trendlines have at least 2 points of contact each... and you really need 3 each for a robust model. among other things, that's the first issue i see with your haphazard lines

i appreciate the point you're trying to make, though. there is little worse than bad science.

--arepo

[Its About Sharing]

Some perhaps, but it's clearly not a wedge regardless of the outcome. Just because it has converging trend lines does not make it a wedge. Same with the recent rise. People were calling it a wedge but it has absolutely ZERO wedge characteristics.

Well, the forum (Trading View) were all up in arms about it when it happened.
But lets look if it has ZERO of it's characteristics: http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:chart_patterns:rising_wedge_reversa

1. Prior Trend: In order to qualify as a reversal pattern, there must be a prior trend to reverse. (Not a long pattern, so perhaps we call it a pennant, but just a technicality) CHECK
2. Upper Resistance Line: It takes at least two reaction highs to form the upper resistance line, ideally three. Each reaction high should be higher than the previous high. Close but no cigar
3. Lower Support Line: At least two reaction lows are required to form the lower support line. Each reaction low should be higher than the previous low. CHECK
4. Contraction: The upper resistance line and lower support line converge as the pattern matures. CHECK
5. Support Break: Bearish confirmation of the pattern does not come until the support line is broken in a convincing fashion. It is sometimes prudent to wait for a break of the previous reaction low. Once support is broken, there can sometimes be a reaction rally to test the newfound resistance level.
6. Volume: Ideally, volume will decline as prices rise and the wedge evolves. An expansion of volume on the support line break can be taken as bearish confirmation. CHECK

And guys, stock patterns are not to be treated like scientific observations. They are just not that exact. It is a toss up half the time and most of the time the pattern doesn't hold true.
You can TA BTC ok, but nothing like a Stock (success wise).

IAS

[arepo]

your axes are really strange there...

but if you look at it, there is also a bullish triangle consolidation pattern that is much more robust. no one is saying that these patterns are foolproof, anyway, and the claim that they 'work better in stocks' is also rubbish. it's not that easy to predict any market.

--arepo

[Its About Sharing]

your axes are really strange there...

but if you look at it, there is also a bullish triangle consolidation pattern that is much more robust. no one is saying that these patterns are foolproof, anyway, and the claim that they 'work better in stocks' is also rubbish. it's not that easy to predict any market.

--arepo

I'm not trying to give you a hard time (just so you know). I like reading your posts.

Regarding stocks vs BTC - I'm not sure you can quantify something like BTC, like a stock (doesn't mean you can't trade it successfully), because it is:
- a stock in a sense (you own a piece of the network).
- commodity
- currency
- payment system
- asset
- Protocol
- ETC
And all this is during a time of financial crisis. I just think trading BTC might make one miss just one move, and that one move, could be a biggy.

Lastly, just for fun.

[arepo]

Good post, arepo.

I'm sceptical of flags in BTC land, so please forgive me if I don't put too much weight behind that. Other than that, you analysis is solid, as always.

Of course it doesn't answer _the_ question that's on everybody's mind: is the larger (post-1200) correction over or not? For fairness sake, I don't expect you to answer it... in fact, I'm wary of anyone who claims he can answer it. I believe the best way to play the current market is to determine your long term price assumptions and your willingness for risk, and then trade (or not trade) accordingly the smaller swings, aiming to ride the bigger wave in the process as good as possible.

Anyway. So far, I'm not that impressed by the current downtrend. Critical levels to watch are 915 (mtgox), the volume weighted median of the first major swing of this correction, and 900 (mtgox), 6h EMA30 that has proven extremely reliable in the past few months (if read correctly). If those are broken and price closes below, I'll think about selling some. Volume-wise, the situation is inconclusive: 2h CMF is stable and positive on mtgox and bitstamp, which is a good sign, but bid/ask ratios are falling like rocks across major exchanges.

All in all, I'd say it's more likely we haven't seen the end of today's downtrend yet, but I'm not quite ready to declare our mini-rally, that started a few days before christmas, dead quite yet.

good rundown.

whether or not the larger correction is over is the same question of whether or not we will break below the critical levels you outlined.

this "mini-rally" is in fact a mid-term trend, whose first point was cemented at the $450 low (mtgox) and which we had been following quite steadily up until a few days ago when we went parabolic. i'm anticipating a large correction at least down to that moving support (corresponding to the green path i drew on the William's Oscillator a few posts above), and if we are still caught in the oscillations of the larger move last month, we could easily tear right through that and revisit an even lower support (corresponding to the red path on the MFI).

either way, there is still a lot of momentum in the trend according to the 1-month oscillator data, and i may have been a little overzealous in the OP when i said that either of these two events could "end the mid-term trend". i do expect a period of consolidation if we break down to a lower support, but i'd say the mid-term outlook is still bullish.

--arepo

[RyNinDaCleM]

Some perhaps, but it's clearly not a wedge regardless of the outcome. Just because it has converging trend lines does not make it a wedge. Same with the recent rise. People were calling it a wedge but it has absolutely ZERO wedge characteristics.

Well, the forum (Trading View) were all up in arms about it when it happened.
But lets look if it has ZERO of it's characteristics: http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:chart_patterns:rising_wedge_reversa

1. Prior Trend: In order to qualify as a reversal pattern, there must be a prior trend to reverse. (Not a long pattern, so perhaps we call it a pennant, but just a technicality) CHECK
2. Upper Resistance Line: It takes at least two reaction highs to form the upper resistance line, ideally three. Each reaction high should be higher than the previous high. Close but no cigar
3. Lower Support Line: At least two reaction lows are required to form the lower support line. Each reaction low should be higher than the previous low. CHECK
4. Contraction: The upper resistance line and lower support line converge as the pattern matures. CHECK
5. Support Break: Bearish confirmation of the pattern does not come until the support line is broken in a convincing fashion. It is sometimes prudent to wait for a break of the previous reaction low. Once support is broken, there can sometimes be a reaction rally to test the newfound resistance level.
6. Volume: Ideally, volume will decline as prices rise and the wedge evolves. An expansion of volume on the support line break can be taken as bearish confirmation. CHECK

And guys, stock patterns are not to be treated like scientific observations. They are just not that exact. It is a toss up half the time and most of the time the pattern doesn't hold true.
You can TA BTC ok, but nothing like a Stock (success wise).

IAS

Apparently we are talking of two entirely different kinds of wedge. Sorry I didn't make the Elliot wave reference in my last post, but from an EW perspective, it had ZERO characteristics of a wedge.
A leading diagonal is a wedge! So is an ending diagonal.

In a wedge, there is overlap in the wave-4 and wave-1.

In a leading diagonal, it takes a count of 5-3-5-3-5. An ending diagonal takes a count of 3-3-3-3-3.

A leading diagonal will have a small correction after it because the wedge itself is an impulse wave. An ending diagonal is the only wedge that is a true "reversal" pattern.
There was nothing about the so called wave-1 that was impulsive to even consider it a leading diagonal. That's because it wasn't a wedge, but actually the D wave of the triangle since the April top.

Oh, and the comment about "ZERO characteristics" was about this recent rise off the $455 bottom. Though I don't think the one you are referring to, looked anything like a wedge either :\

[Miz4r]

Some perhaps, but it's clearly not a wedge regardless of the outcome. Just because it has converging trend lines does not make it a wedge. Same with the recent rise. People were calling it a wedge but it has absolutely ZERO wedge characteristics.

Well everyone including arepo were talking about this bearish wedge in masterluc's thread: https://bitcointalk.org/index.php?topic=274613.msg4321827#msg4321827

Weird how everyone agrees it's a wedge (or at least nobody disagreed) when it's forming and hasn't broken to the up- or downside yet but when it does break to the upside it suddenly isn't a wedge anymore and it never was...