Something, something, something, technical analysis

[T.Stuart]

If I've got this right you are in earlier than you were planning a couple of weeks ago am I right?

What was your planned buy-in point a couple of weeks ago compared with the price you actually bought in, if I may ask?

No, not really. Short recap, maybe:

I wrote a long post about the bearish triangle variants on April 25th, see here. That one guided me as far as the time frame was concerned -- convergence scenario #1 was predicted for late May at the latest, and the actual breakout was May 20, so it was pretty accurate. At the time of that post, I was still rather bearish, expecting we'd probably see a breakout to the downside. Maybe that's what you have in mind when you say "earlier than I planned"?

On May 16th I posted about a new observation that, based on MFI (a money flow oscillator), it looked like we had finally found sufficient buying support at the given price level. See the post here. From that point on I was, as I wrote, "cautiously bullish".

By May 20, MFI had continued to develop exactly as I hoped it would, so I didn't hesitate much when the breakout happened. I'm in since about 460, not tempted to sell (yet).

Thanks for the recap. I can't find the post in particular (admit have not looked very hard) but remember you saying that you would not enter until sure of a reversal (and if I remember correctly that was at least in the 500s if not 600s in your opinion at the time) because you were in profit anyway so it didn't really matter.

Just trying to understand people's changing perspectives. The posts you made since (that you mention above) explain...

[windjc]

Edit 2: Started on Huobi AGAIN. This is all coming from China. Every single time almost. Worrying?

Not really. The entire rally (from $450) started, within <15 min of each other, on stamp and huobi simultaneously, with them taking turns in getting new (relative, of course) volume highs after the breakout. I take that as a reasonably organic start.

What happened afterwards is another matter, but I'm not going to let the old adage that we need fresh fiat guide my trading mechanically. I'd suggest taking profits if and when it becomes apparent that the current rally ran out of steam, not earlier, unless you know with some certainty ahead of time the inflection point. But as always: different trading styles, different recommended actions.

As most always, we are in agreement.

Although we are entering the zone where I am watching for weakness like a hawk. Finex is leveraged at close to 19 million (down to 17.5), and the rates have skyrocketed, meaning, in my opinion, that fiat is getting tapped out there.

How much is sitting in Houbi on the sidelines? How much can secretly get into that exchange. How much is sitting in Stamp and Finex, untouched? These would be great inside information.  

Can we expect new fiat this week? I am a little skeptical, but hell we are in a full on bull run, so maybe I shouldn't be.

[oda.krell]

As most always, we are in agreement.

Although we are entering the zone where I am watching for weakness like a hawk. Finex is leveraged at close to 19 million, and the rates have skyrocketed, meaning, in my opinion, that fiat is getting tapped out there.

How much is sitting in Houbi on the sidelines? How much can secretly get into that exchange. How much is sitting in Stamp and Finex, untouched? These would be great inside information. :)  

Can we expect new fiat this week? I am a little skeptical, but hell we are in a full on bull run, so maybe I shouldn't be.

Yes, I'm sure I know the feeling... but I realized also that, right now, I can't pick up with certainty whether we're done yet with this rally, so the best I can do is set (mentally) a stop sell that makes sense to me, and wait whether it comes to that, i.e. while I prefer to go "predictive momentum" usually, this time, I'll have to go "full momentum"... cue: never go full momentum.jpg :P

[windjc]

As most always, we are in agreement.

Although we are entering the zone where I am watching for weakness like a hawk. Finex is leveraged at close to 19 million, and the rates have skyrocketed, meaning, in my opinion, that fiat is getting tapped out there.

How much is sitting in Houbi on the sidelines? How much can secretly get into that exchange. How much is sitting in Stamp and Finex, untouched? These would be great inside information.  

Can we expect new fiat this week? I am a little skeptical, but hell we are in a full on bull run, so maybe I shouldn't be.

Yes, I'm sure I know the feeling... but I realized also that, right now, I can't pick up with certainty whether we're done yet with this rally, so the best I can do is set (mentally) a stop sell that makes sense to me, and wait whether it comes to that, i.e. while I prefer to go "predictive momentum" usually, this time, I'll have to go "full momentum"... cue: never go full momentum.jpg

Well I'm full BTC. But I closed out my extra leveraged longs for the same reason. If we consolidate under $600 I will leverage up again, because a rally never ends without a large flame out. So a consolidation at these levels would signal a run to $630+ in my books. Then I would really be watching for exhaustion. Rinse, repeat.

[MatTheCat]

Not really. The entire rally (from $450) started, within <15 min of each other, on stamp and huobi simultaneously, with them taking turns in getting new (relative, of course) volume highs after the breakout. I take that as a reasonably organic start.

What happened afterwards is another matter, but I'm not going to let the old adage that we need fresh fiat guide my trading mechanically. I'd suggest taking profits if and when it becomes apparent that the current rally ran out of steam, not earlier, unless you know with some certainty ahead of time the inflection point. But as always: different trading styles, different recommended actions.

Your charts also demonstrate that Huobi kicks off proceedings, each time, and that Bitstamp follows.

With regards to your thoughts on whether the rally was running out of steam, I would say that we seem to have a bit of a closing diagonal formation occurring that might suggest the bullish sentiment being met with exhaustion. Since I only came back in the trade at $571, I am out again now at $584. Far greater probability of the market reversing over my toes than going much further in my favour at this point.

Negative divergence continues to raise it's head on the 4hr and shorter indicators (RSI, CMF) as volume continues to drop with each successive peak. I say we have had the top, or that the final top will be just a few dollars more.

[windjc]

Not really. The entire rally (from $450) started, within <15 min of each other, on stamp and huobi simultaneously, with them taking turns in getting new (relative, of course) volume highs after the breakout. I take that as a reasonably organic start.

What happened afterwards is another matter, but I'm not going to let the old adage that we need fresh fiat guide my trading mechanically. I'd suggest taking profits if and when it becomes apparent that the current rally ran out of steam, not earlier, unless you know with some certainty ahead of time the inflection point. But as always: different trading styles, different recommended actions.

Your charts also demonstrate that Huobi kicks off proceedings, each time, and that Bitstamp follows.

With regards to your thoughts on whether the rally was running out of steam, I would say that we seem to have a bit of a closing diagonal formation occurring that might suggest the bullish sentiment being met with exhaustion. Since I only came back in the trade at $571, I am out again now at $584. Far greater probability of the market reversing over my toes than going much further in my favour at this point.

Negative divergence continues to raise it's head on the 4hr and shorter indicators (RSI, CMF) as volume continues to drop with each successive peak. I say we have had the top, or that the final top will be just a few dollars more.

Maybe. Or maybe we just rest for a day or two before exploding north again.

[JustAnotherSheep]

With regards to your thoughts on whether the rally was running out of steam, I would say that we seem to have a bit of a closing diagonal formation occurring that might suggest the bullish sentiment being met with exhaustion. Since I only came back in the trade at $571, I am out again now at $584. Far greater probability of the market reversing over my toes than going much further in my favour at this point.

Negative divergence continues to raise it's head on the 4hr and shorter indicators (RSI, CMF) as volume continues to drop with each successive peak. I say we have had the top, or that the final top will be just a few dollars more.

I agree. The rising wedge(s?) in particular does not seem to support the bull run going much farther. Not to mention the fact that daily MACD is at approximately the same level as the peak of the post-bubble bulltrap (379-998), and daily RSI shows we're overbought atm (at least I think so, still a noob to these indicators so someone correct me if I'm wrong).



Also, an interesting fact is that the (initial, at least) wedge closes at $647, which is just a few dollars above SMA200. Coincidence?

[MatTheCat]

and daily RSI shows we're overbought atm (at least I think so, still a noob to these indicators so someone correct me if I'm wrong).

RSI on 4 hour chart is showing signs of negative divergence.

Bitcoin at $530 - RSI ~ 90
Bitcoin at $545 - RSI ~ 94
Bitcoin at $586 - RSI ~ 87
Bitcoin at $593 - RSI ~ 86

Shorter term (30 mins) chart indicators perhaps show things a little clearer that some kind of correction is likely on the cards, of course, price can still rise quite a bit as these indicators continue to trend lower, before the canary finally chokes, so to say:

[studio1one]

With regards to your thoughts on whether the rally was running out of steam, I would say that we seem to have a bit of a closing diagonal formation occurring that might suggest the bullish sentiment being met with exhaustion. Since I only came back in the trade at $571, I am out again now at $584. Far greater probability of the market reversing over my toes than going much further in my favour at this point.

Negative divergence continues to raise it's head on the 4hr and shorter indicators (RSI, CMF) as volume continues to drop with each successive peak. I say we have had the top, or that the final top will be just a few dollars more.

I agree. The rising wedge(s?) in particular does not seem to support the bull run going much farther. Not to mention the fact that daily MACD is at approximately the same level as the peak of the post-bubble bulltrap (379-998), and daily RSI shows we're overbought atm (at least I think so, still a noob to these indicators so someone correct me if I'm wrong).



Also, an interesting fact is that the (initial, at least) wedge closes at $647, which is just a few dollars above SMA200. Coincidence?

alternatively, looking at the run as a whole



the rise is diverging, not converging.

[MatTheCat]

the rise is diverging, not converging.

and if you want to zoom further out and take the last two highs and the last two lows, we again have a rising converging diagonal:



The TA 101-ist, has to decide what kind of ranges are most useful to him and this requires common sense.

[studio1one]

the rise is diverging, not converging.

and if you want to zoom further out and take the last two highs and the last two lows, we again have a converging diagonal:



But the TA 101-ist, has to decide what kind of ranges are most useful to him and this requires common sense.

Agreed,

for me the rising wedges shown in the first pic are each stage of the rise. It rises to the peak-ish, levels out then starts another rise. Each stage definitely runs out of steam, then we level off until the next rise.

For me, looking at the current rise as a whole, from where it started at around 450 there is no wedge forming at all, in fact the opposite. Volume is rising each rise on Huobi, and around stagnant on stamp.

Also 3 day moving average is about to cross for the first time since Feb.

Firm bull still here.

As this is being led by Huobi I don't see the current run running out of steam at all just yet.

[JustAnotherSheep]

Agreed,

for me the rising wedges shown in the first pic are each stage of the rise. It rises to the peak-ish, levels out then starts another rise. Each stage definitely runs out of steam, then we level off until the next rise.

For me, looking at the current rise as a whole, from where it started at around 450 there is no wedge forming at all, in fact the opposite. Volume is rising each rise on Huobi, and around stagnant on stamp.

Also 3 day moving average is about to cross for the first time since Feb.

Firm bull still here.

As this is being led by Huobi I don't see the current run running out of steam at all just yet.

Ah, good points, especially regarding Huobi. Just took a look and there doesn't even seem to be any wedge formation(s) on that exchange, so maybe they can keep dragging Bearstamp along (if the wedges are valid in the first place, that is).

Nevertheless, daily RSI is still overbought on both exchanges, although this doesn't necessarily have to signify a very huge drop I realized, as during 2013 it also got into overbought territory once before the bubble, and this was only followed by a correction of $130-115 (as well as a longer period of consolidation) before resuming the rise (disregarding the SR flashcrash).

[oda.krell]

Nevertheless, daily RSI is still overbought on both exchanges, although this doesn't necessarily have to signify a very huge drop I realized, as during 2013 it also got into overbought territory once before the bubble, and this was only followed by a correction of $130-115 (as well as a longer period of consolidation) before resuming the rise (disregarding the SR flashcrash).

As a general rule (and I say that as someone who's also still learning pretty much the basics), seeing an overbought/oversold condition and making a decision (mainly) based on that is not a good idea.

Example: daily RSI was overbought on October 23rd, November 9th and November 19th. Only on the last date, I'd argue, would it have been profitable (after slippage and fees) to sell and re-buy (fast!), because the drop in all other cases was barely noticeable. In either case, after a possible sell you better would have went in immediately, because  price still had a long way to go until the inflection point peak of the bubble.

But taken together, the 3 RSI overbought conditions formed a nice rising sequence, confirming the uptrend until late November. November 30th and December 4th saw rising (or level) price highs, but declining RSI highs, i.e. a regular bearish divergence. So RSI analysis was after all capable of indicating that a reversal was overdue, but only taking all the RSI peaks together.

So that's how I try to read oscillators like RSI: overbought/oversold conditions are at first just a "warning" signal that you need to look at the context around those peaks. But the actual conclusion what the indicator tells you is a bit more complicated than concluding that we're going down or up (substantially) because of the overbough/sold condition.

[JustAnotherSheep]

Nevertheless, daily RSI is still overbought on both exchanges, although this doesn't necessarily have to signify a very huge drop I realized, as during 2013 it also got into overbought territory once before the bubble, and this was only followed by a correction of $130-115 (as well as a longer period of consolidation) before resuming the rise (disregarding the SR flashcrash).

As a general rule (and I say that as someone who's also still learning pretty much the basics), seeing an overbought/oversold condition and making a decision (mainly) based on that is not a good idea.

Example: daily RSI was overbought on October 23rd, November 9th and November 19th. Only on the last date, I'd argue, would it have been profitable (after slippage and fees) to sell and re-buy (fast!), because the drop in all other cases was barely noticeable. In either case, after a possible sell you better would have went in immediately, because  price still had a long way to go until the inflection point of the bubble.

But taken together, the 3 RSI overbought conditions formed a nice rising sequence, confirming the uptrend until late November. November 30th and December 4th saw rising (or level) price highs, but declining RSI highs, i.e. a regular bearish divergence. So RSI analysis was after all capable of indicating that a reversal was overdue, but only taking all the RSI peaks together.

So that's how I try to read oscillators like RSI: overbought/oversold conditions are at first just a "warning" signal that you need to look at the context around those peaks. But the actual conclusion what the indicator tells you is a bit more complicated than concluding that we're going down or up (substantially) because of the overbough/sold condition.

Fair enough, yeah makes sense.

Naturally I won't be basing any trade decisions solely on RSI (particularly not when I'm such a noob with it ) but rather in combination with other analysis. Though it should be noted that the October and November cases you mention were all during the bubble, when (I assume) overbought RSI should be the rule rather than exception, and the example I mentioned (August 2013) was well before the bubble, so from this one might infer that RSI being overbought outside of bubbles acts as a stronger sell-indicator. But then of course there is the problem with knowing how long it will stay overbought, and how high it will go, which (as previously mentioned) necessitates one using other indicators in combination to make any hard decisions.

Though, looking at historic timescale on Stamp, I just noticed an interesting pattern: For every case of (daily) RSI being overbought outside of bubbles, the RSI top has been extremely consistent before price went down/consolidated: 83-85 (what do you even call that, RSI level?). Currently we're on 79, which according to this would give us some more room to go before the hypothesized correction (also assuming this is not the start of a bubble, which I doubt). Curious to see if this pattern holds again.

[bassclef]

RSI can stay overbought/oversold for a long time in strong bull/bear markets.

If yore going to be calling bubble tops with it use a long time period, like 3d or weekly.

[igorr]

RSI can stay overbought/oversold for a long time in strong bull/bear markets.

If yore going to be calling bubble tops with it use a long time period, like 3d or weekly.

Willy bot creates RSI indicator and the price and chart.

[oda.krell]

Fair enough, yeah makes sense.

Naturally I won't be basing any trade decisions solely on RSI (particularly not when I'm such a noob with it ) but rather in combination with other analysis. Though it should be noted that the October and November cases you mention were all during the bubble, when (I assume) overbought RSI should be the rule rather than exception, and the example I mentioned (August 2013) was well before the bubble, so from this one might infer that RSI being overbought outside of bubbles acts as a stronger sell-indicator. But then of course there is the problem with knowing how long it will stay overbought, and how high it will go, which (as previously mentioned) necessitates one using other indicators in combination to make any hard decisions.

Though, looking at historic timescale on Stamp, I just noticed an interesting pattern: For every case of (daily) RSI being overbought outside of bubbles, the RSI top has been extremely consistent before price went down/consolidated: 83-85 (what do you even call that, RSI level?). Currently we're on 79, which according to this would give us some more room to go before the hypothesized correction (also assuming this is not the start of a bubble, which I doubt). Curious to see if this pattern holds again.

I like the approach: segment our data into different types of periods (I'm trying for now: bubble-rally, bubble-deflation, consolidation-upwards, consolidation-downwards) and see how RSI behaves in each segment. Playing around with it myself now.

[MatTheCat]

Here is some Elliot Wave analysis depicting where I believe we are in Bitcoin's price discovery progression. The chart shows that we may be in the midst of a counter trend  Wave B, after having had a corrective Wave A, which consisted of a clean 5-3-5-3-5 impulse move down:





The next chart below, shows the possible development of a leading diagonal Wedge formation. Important to note, is that the support line for this wedge traces back to Jan 2013, and was the support line which was tested just a couple of days prior to the break out above the Jan 2014 resistance line. The resistance line shown in red, is from the Dec 2013 highs. It was also broken through at $540 mark:




Below, is a 4hour Bitstamp chart showing that the support line for the $440 - $595 rise has been breached, with a parallel down channel showing likely price trend over coming days. Note also the negative divergence of the RSI, and also the maxed out state of the MACD. The two reddish lines on the chart are the 38% and 50% Fib retracement targets. This is where I believe the correction is likely to stop and find support for next leg up of wedge. Should Bitcoin trend lower than this and touch and/or get beyond the 61% Fib retracement line around the same time (or before) the projected parallel trading channel meets it, then this could show itself to be a critical turning point which renders this TA null and void, as the lower blue support line, is not just the support for the wedge, but a long term support since Jan 2013:





This final chart indicates that if the Wedge Support line is breached, then we could assume that Wave B has played out between $340 and $595, and that Wave C will have begun. At this point in time however, I am not thinking this is going to play out:




Summary:

Short Term: Bitcoin to trend down to $500

Medium Term: Bitcoin to continue to zig zag in rising diagonal formation shown, ultimately breaking out and reaching 50% Fib retracement zone (~$750) marking $1160 - $340 correction.

Long term: Bitcoin to $200.

[RandomPedestrianN9]

You DA MAN Mat! Bang all the bagholders!

[jamesc760]

MTC:
"Long term: Bitcoin to $200."

You should be a standup comedian.

So funny. It just shows you how anyone can do TA and make it fit your own personal view.

I know you're going to go verbal on me for saying it. But, I will always cherish your point of view, however bearish it may be.