Something, something, something, technical analysis

[JustAnotherSheep]

Interesting, thank you for the info and insight of this Ichimoku cloud tool - I believe it shall prove very handy for future weather predictions

Though I am also skeptical about the 26-day delay thing. While I do not even pretend to understand it, I wish (as you do) to see more hard proof for why it is so.

As for the March 24 pattern (and, seemingly, the same we are seeing today) I believe it is more a matter of buying vs selling pressure; when we move into the cloud (or for that matter approach/ping at a resistance line) people increasingly get an idea that price won't go much further, and start selling. This triggers a snowball effect, bullish momentum slows as more and more people are selling, which further prompts people to sell, thinking price is about to go down, and finally when the selling pressure exceeds the buying pressure we get the big red candles, and a stronger snowball effect of "ok, price IS going down, no doubt about it, might as well sell now"-sentiment, triggering the extreme bearish volatility.

I think this is happening right now, as per the established logic of the self-similar bear cycles, and as such we will (as you have already stated) see a major leg down within 3 days, give or take.

[Bitcoin_is_here_to_stay]

As I understand it, I Clouds were invented in the old days, to avoid hassle of computing moving averages - they are somewhat cruder version of MA, I understand. They look cool and form very clear pattern but when I looked at the past bitcoin price, they did not seem particularly useful.

[oda.krell]

As I understand it, I Clouds were invented in the old days, to avoid hassle of computing moving averages - they are somewhat cruder version of MA, I understand. They look cool and form very clear pattern but when I looked at the past bitcoin price, they did not seem particularly useful.

Not sure if I'd consider that a very convincing argument against them. They're based on a number of (shorter term, longer term) medians, i.e. (H+L)/2, which I don't consider per se inferior to moving averages  (arithmetic means). Both have their place in TA, in my opinion. As far as usefulness is concerned, like I said, I'm still skeptical as well, but for example during the reversal period of 2013, Ichimoku analysis would have given pretty clear reversal signals well before reaching 100 (starting from around 90), which isn't too shabby if you are a swing trader who aims to take in only the large movements.

[Bitcoin_is_here_to_stay]

As I understand it, I Clouds were invented in the old days, to avoid hassle of computing moving averages - they are somewhat cruder version of MA, I understand. They look cool and form very clear pattern but when I looked at the past bitcoin price, they did not seem particularly useful.

Not sure if I'd consider that a very convincing argument against them. They're based on a number of (shorter term, longer term) medians, i.e. (H+L)/2, which I don't consider per se inferior to moving averages  (arithmetic means). Both have their place in TA, in my opinion. As far as usefulness is concerned, like I said, I'm still skeptical as well, but for example during the reversal period of 2013, Ichimoku analysis would have given pretty clear reversal signals well before reaching 100 (starting from around 90), which isn't too shabby if you are a swing trader who aims to take in only the large movements.

My understanding was that the creator consciously prioritized ease of computing over efficiency

http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators:ichimoku_cloud

so in that sense I would rather go with more "high tech" indicators. I have not tried it extensively, either, but for my purposes things like (E)MA, RSI, MACD, volume  etc work just fine. I have slightly different interests than you, though. I am also long term oriented, but I am not interested in trading swings, just in identifying good long term entry and exit points.

[oda.krell]

A bit of price action, today, and the day before yesterday. I'm extremely skeptical though, I admit. My best bet right now is that the situation is similar to the one we were in end of January:





Starting out in the lower daily BB half, inching upwards, maybe closing (just barely) above the SMA20 (the mid line of BB), only to fall back into the lower half. I do consider it possible to reach the upper half because daily MACD turned green, so some upwards momentum is to be expected.

For contrast though, look at price in relation to daily BB after we hit bottom last time (July 2013)





We decisively went through the mid SMA, and didn't close in the lower half until much later. Which is (EDIT) why I (/EDIT) personally won't trust this recovery until we are more firmly established in the upper half/above the SMA again.

[Bitcoin_is_here_to_stay]

A bit of price action, today, and the day before yesterday. I'm extremely skeptical though, I admit. My best bet right now is that the situation is similar to the one we were in end of January:





Starting out in the lower daily BB half, inching upwards, maybe closing (just barely) above the SMA20 (the mid line of BB), only to fall back into the lower half. I do consider it possible to reach the upper half because daily MACD turned green, so some upwards momentum is to be expected.

For contrast though, look at price in relation to daily BB after we hit bottom last time (July 2013)





We decisively went through the mid SMA, and didn't close in the lower half until much later. Which is personally won't trust this recovery until we are more firmly established in the upper half again.

+1 So far it stays in "dead cat bounce" area. Would have to go considerably higher - $480? - to look like trend reversal.

[oda.krell]

So, we're back below the daily Ichimoku cloud, which I described as the most likely case (barring a move to ~470 that never manifested) in my post 5 days ago.



Note that the shape of the cloud ahead of us would in principle allow for more sideways trading, below ~450, avoiding a more decisive price movement up or downwards.

However, "more of the same" (sideways movement) is not the most likely scenario in my opinion. We're still firmly inside the triangle pattern that I consider the best candidate for the boundaries of the downtrend we're in since December:



I've posted about several different versions of that large triangle before, but here's a quick recap: all trendlines are drawn in log, the resistance trendline is well known and seems fairly obvious (3 points of contact), the higher of the two support lines runs through the rising points of support around 400 (but was broken briefly on April 10/11), and the lower support line runs from April 2013 $260 to April 2014 $340. It only has two points of contact, so technically doesn't count, but I have a simple independent argument in favor of it that I'm going to post here later. Note that this supporting trendline doesn't necessarily imply that we've seen the final bottom (at $340), just that we'd expect to see some support along this trend.

Based on those two triangles, I would expect a more decisive move of the market within the next 2 weeks at the latest. Mainly for reasons of volume and money flow analysis, I am leaning towards predicting a bearish breakout, expecting that we will probably fall through the higher of the two supporting lines, and will at least test the lower one afterwards.

On the other hand, here's the case in favor of an upwards breakout:



With a bit of charitableness, I can see a falling wedge (good info on the pattern here), with signs of declining selling pressure both in the MACD and the more "gentle" downwards slope  of the lower trendline. This could hint at a continuation of the previous upwards move, the bull run that took us from $340 to $550, so: a bullish continuation pattern that could catapult us out of the large triangle. I consider it highly speculative though, so I'd wait for bullish confirmation in the form of a breakout through the upper line on high enough volume before acting on it.


EDIT: here are the numbers for the events described above, as of 2014-05-14: log downtrend @~460, higher support line @~400, lower support line @~350, bullish breakout target of falling wedge @~450 (keep in mind: needs volume for confirmation)

[oda.krell]

Price support, finally?

Okay, here's a (cautiously) bullish observation. I've argued before that one way to conceptualize the different periods of the bear market we've seen is that the market goes through rapid price swings, then stabilizes for a moment, and then determines if the price at whatever plateau we landed at is supported sufficiently by buying. In the past 4 months or so, the answer was always: "no". I have also argued that those plateaus are (probably not coincidentally) located around "round numbers", like 800, probably for psychological reasons, but I'm not sure about the latter part anymore. (here's an idea I wrote on this on tradingview).

Alright, so here's the bullish part: if I define those "briefly stable plateaus" in a natural way, say via BBW, and look at an oscillator like MFI (that in my experience is excellent for picking up changes in buying pressure), we get a rather positive picture for the current plateau:



The orange line in the MFI window (at 50) marks the difference between negative and positive money flow. The 6h view is, imo, a good compromise between picking up changes reasonably fast, while filtering out unwanted noise.

The picture I get is that during plateau #1 (January, 1st red rectangle) and plateau #2 (March, 2nd red rectangle), we saw substantial negative money flow, spending most of the time below the zero/50 line, and peaking deeper into negative territory than we did into positive territory. In other words, we didn't find support at those levels at those times, and price declined as a consequence.

Contrast this with the most recent plateau, around 440/450, and we see that we stay mostly in positive MFI territory, and see a possible upwards trend in MFI where higher MFI highs and lows indicate that we found buying support at the current level.

To really be sure of this, I would say we'd need to see MFI go above 80 now (pretty close already, at 78/79 right now). Note that in January, a (slightly weaker) upwards trend seemed to form as well, but was followed by a very sharp drop into negative territory and subsequent price decline. Say 6h MFI would cross above 80, and then, on the following (inevitable) swing down would stay in positive territory (or only briefly dip into negative), then we have  strong case that buying support for mid-400s really exists.

* * *

That's the observation. I said "cautiously bullish", because I still see a) the possibility that a large enough dump by a whale (e.g. on the Chinese exchanges) will take us back into panic selling mode, and b) because based on the overall low volume, I don't see us entering a fully developed bull market anytime soon.

But if my observation about support at this price level is correct, then that would mean that any sharp price drop (caused for example by a whale) would probably be quickly reversed, by snapping back to the current price level. It would also give us the chance to slowly grind our way out of the bearish triangle.

[oda.krell]

Funny little pattern (32 weeks).

Did I mention I'm in a relatively bullish mood lately?

Here's an amusing little pattern that I never noticed before. Discovered, or at least posted on r/BitcoinMarkets by user:amichateur.

The basic observation is: it appears that after (on average) 31.8 weeks, price reaches a local maximum (where local maximum is not properly defined for now, missing a specification of the distance/neighbourhood. deal with it, formally minded people).

Here's his thread: http://www.reddit.com/r/BitcoinMarkets/comments/25to0r/bitcoin_price_past_and_future_local_maximum_every/

Don't take it too serious, please. It's quite possibly a meaningless observation, and an even less informative extrapolation, but it will be fun at least to see if the pattern holds around early July or not.

[Wary]

this observation seems to hold for all of our price data so far. Not even in the bear market of 2011 it was broken

Assuming the exponential trend, the fact is trivial (in math sense of the world). The only non-trivial point is in 2011, when the trend was down. So, we have only one informative point, which is not quite enough for a generalization. Although I do wish your observation be true

[oda.krell]

this observation seems to hold for all of our price data so far. Not even in the bear market of 2011 it was broken

Assuming the exponential trend, the fact is trivial (in math sense of the world). The only non-trivial point is in 2011, when the trend was down. So, we have only one informative point, which is not quite enough for a generalization. Although I do wish your observation be true

That's why I wrote

Don't take it too serious, please. It's quite possibly a meaningless observation, and an even less informative extrapolation, but it will be fun at least to see if the pattern holds around early July or not.

It /is/ interesting though that even in the huge bear market of 2011, at week 32 (after the ath) the price had recovered again above the mid point. But agreed, way to little data points to make a claim for any substantial statistical power.

[windjc]

It looks like we are in a season with an extreme lack of sellers. It's obvious that no one is buying (at least on exchange), but with the really low recent bitcoin days destroyed trend and the miners seemingly refusing to sell at a loss, we have come to a complete stop.

I think we can make a short/intermediate bull run if we slowly start to edge upwards. I think this mainly because I think there is enough money sitting on the sidelines of exchanges to drive the price to the 600's. But without new money (god I hate repeating myself dozens of times) coming in, I could see us trading in the 450-650 range for a long time, with a slow drift back down towards 450, if a mini-bull rally didn't entice new investors.


Of course, tomorrow China could ban bitcoin exchanges or Houbi could declare itself insolvent and the bottom could fall out of this entire market.

[oda.krell]

It looks like we are in a season with an extreme lack of sellers. It's obvious that no one is buying (at least on exchange), but with the really low recent bitcoin days destroyed trend and the miners seemingly refusing to sell at a loss, we have come to a complete stop.

I think we can make a short/intermediate bull run if we slowly start to edge upwards. I think this mainly because I think there is enough money sitting on the sidelines of exchanges to drive the price to the 600's. But without new money (god I hate repeating myself dozens of times) coming in, I could see us trading in the 450-650 range for a long time, with a slow drift back down towards 450, if a mini-bull rally didn't entice new investors.


Of course, tomorrow China could ban bitcoin exchanges or Houbi could declare itself insolvent and the bottom could fall out of this entire market.

>I think we can make a short/intermediate bull run if we slowly start to edge upwards.
Agreed. I've said it a few times before,  I think the most relevant observation right now is that we seem to see a) sellers' exhaustion, and b) no matching increase in buying pressure (which is different from 2013 for example). Possibly, the reversal we're in now more closely resembles early 2012 than mid 2013.

>if a mini-bull rally didn't entice new investors.
Agreed as well. But as you note yourself: price increase can have this funny little habit of becoming self sustaining from a certain point onwards. Probably not at 600, but say we make it to 700, and as a result the first articles keep popping up in NYT and Forbes "To our surprise, Bitcoin is recovering quite well (but we still don't trust it)", and suddenly a new wave of money  flows in that takes us to 800. Wash rinse repeat. (nb: not saying that will happen for sure, but it's a possibility)

[JustAnotherSheep]

I don't think sellers' exhaustion entirely applies to this situation, at least not yet. As demonstrated in the other thread linking to that article on blockchain analysis, there's still a crapload of ~3-month holders, most of which are presumably deep underwater, and a breakthrough of the long-term support line (as is possibly happening now, no volume as of yet though so could be false), would confirm a continuation of the bear market which, I believe, would prompt many of these hodlers to sell in hopes of buying back later on (or perhaps pulling a Veronica and leaving the game entirely).




This is, of course, not even accounting for the risk-taking traders and (possibly) whales who were expecting an upwards breakthrough and price spike, and would probably be among the first to sell now, creating enough momentum for the hodlers to follow suit.

[oda.krell]

I don't think sellers' exhaustion entirely applies to this situation, at least not yet. As demonstrated in the other thread linking to that article on blockchain analysis, there's still a crapload of ~3-month holders, most of which are presumably deep underwater, and a breakthrough of the long-term support line (as is possibly happening now, no volume as of yet though so could be false), would confirm a continuation of the bear market which, I believe, would prompt many of these hodlers to sell in hopes of buying back later on (or perhaps pulling a Veronica and leaving the game entirely).




This is, of course, not even accounting for the risk-taking traders and (possibly) whales who were expecting an upwards breakthrough and price spike, and would probably be among the first to sell now, creating enough momentum for the hodlers to follow suit.

Valid point. I base my claim of seller exhaustion on the following observations: declining BBW, overall declining volume as price declines, and (more locally) lower volume on each progressive "crash". I do believe (and agree with you in that) that this can be temporary, and possibly more bear market will bring back the panic. I just observe that, right now, any local decline in price seems to trigger only small reactions.

[JustAnotherSheep]

Valid point. I base my claim of seller exhaustion on the following observations: declining BBW, overall declining volume as price declines, and (more locally) lower volume on each progressive "crash". I do believe (and agree with you in that) that this can be temporary, and possibly more bear market will bring back the panic. I just observe that, right now, any local decline in price seems to trigger only small reactions.

I earnestly hope you are wrong, as this endless sideways movement is absolutely horrid and does not befit the typical, exciting rollercoaster-ride that is Bitcoin. If it turns out we're just breaking out of the triangle for yet another drawn-out and disappointing period of sideways stagnation, I do believe I shall shoot myself out of boredom.

[oda.krell]

Valid point. I base my claim of seller exhaustion on the following observations: declining BBW, overall declining volume as price declines, and (more locally) lower volume on each progressive "crash". I do believe (and agree with you in that) that this can be temporary, and possibly more bear market will bring back the panic. I just observe that, right now, any local decline in price seems to trigger only small reactions.

I earnestly hope you are wrong, as this endless sideways movement is absolutely horrid and does not befit the typical, exciting rollercoaster-ride that is Bitcoin. If it turns out we're just breaking out of the triangle for yet another drawn-out and disappointing period of sideways stagnation, I do believe I shall shoot myself out of boredom.

I talked to a lady at the bitcoin foundation member meeting two days ago (a real, live lady! double x chromosomes! at bitcoin!) (I'm kidding. lots of ladies in bitcoin.) (only about 10 to 15% I guess. great now I'm depressed :/) who said that she'd consider less volatility much preferable to the current situation. She works for a large European company that didn't integrate anything Bitcoin yet, but they seem to keep their eyes open.

Not exactly 6 o'clock news (companies abhor risk, volatility = risk), but I'm just putting that out here: us traders might dislike flat periods, but big business probably doesn't mind it.

[oda.krell]

Update on long term downtrend and Money Flow


Long term log downtrend broken: check




SMA50 broken: check




Money flow stable to rising: check




Comparably low volume so far (though better than the week before), which is both consistent with "guided action" by a whale, or just the cautiousness you'd expect after a long bear market.

I do however take the MFI development (since my last post about it) as evidence that we have decent price support at this level, so even if we don't see a high-volume rally coming up in the next days (which the bulls are cheering for now), I now consider the events 'rally' or 'slow crawl upwards' strictly more likely than 'sudden crash' or 'slow crawl downwards'.

To be on the safe side, waiting for confirmation through volume until tomorrow could be a good idea, but it can also mean you're missing out on profit. Your choice.

tl;dr If this is another pump & dump, it is well enough orchestrated for me to think this is the real deal. Short-to-mid term bullish again.

[studio1one]

Update on long term downtrend and Money Flow


Long term log downtrend broken: check




SMA50 broken: check




Money flow stable to rising: check




Comparably low volume so far (though better than the week before), which is both consistent with "guided action" by a whale, or just the cautiousness you'd expect after a long bear market.

I do however take the MFI development (since my last post about it) as evidence that we have decent price support at this level, so even if we don't see a high-volume rally coming up in the next days (which the bulls are cheering for now), I now consider the events 'rally' or 'slow crawl upwards' strictly more likely than 'sudden crash' or 'slow crawl downwards'.

To be on the safe side, waiting for confirmation through volume until tomorrow could be a good idea, but it can also mean you're missing out on profit. Your choice.

tl;dr If this is another pump & dump, it is well enough orchestrated for me to think this is the real deal. Short-to-mid term bullish again.

Clouds dammit. I want clouds.

[oda.krell]

Clouds dammit. I want clouds.

Way too early for that :D

But chances are better now we're getting there pretty soon, I believe.