Bearish Ambivalence Signals a Possible Reversal at $8250

١٧ مايو ٢٠١٨

After the fairly strong reversal signals above 9.7k-9.8k with 4 hr and even some 1 D RSI divergence we saw a fairly swift breakdown below 9.8k which was more bearish than I expected but not totally unexpected given the overall weakness in sentiment and volume combined with the strong resistance at 10k and the longer duration divergence indicators being signaled. Most of this recent reversal seemed to be short positions unwinding during low liquidity. Now that short positions have normalized we can expect far fewer short squeezes to bump prices higher. While bullish sentiment wasn't particularly strong, bearish sentiment also appears to have weakened as significant short positions closed during the move down suggesting profit taking on both sides took place during the most recent fall from $9800+.

Recent price action has revealed some new descending channels as well as a clear support area which we've tested now over two distinct periods. As a new descending channel has been defined we now find price moving between a tight range formed by the bottom of an ascending channel (teal/blue) and the bottom of the newer descending channel (purple) with declining volume.

a few things:

1) We're in between trends on the 1 D ADX. which tends to be a poor place to buy / sell
2) 4 hr RSI convergence signaling, which suggests another run higher is possible though a dip lower is possible but not likely to be significant, i.e. good risk/reward for going long.
3) Overall pattern could be a sym triangle though it's unclear whether this will be for a continuation down
4) Short position taking has stalled which confirms the ambivalence in the market
5) Google Search Sentiment has been generally flat or declining gradually for nearly 2 months, which could suggest that the market has bottomed out though no sentiment reversal has been triggered.
6) Strong 1 D RSI has yet to be triggered and a big move below 6k could be needed before a strong bottoming out leads to a reversal.
7) A move back to $9400 seems possible but taking shorts at that level seems wise if one has not taken one at a higher price level.
8) A reversal at the current price level around $8300 would confirm the bottom of a large ascending channel and a bounce off of another descending channel. A break above $8430 in the next few days could signal a momentum reversal and would be a buy signal given the RSI convergence signaling.

١٨ مايو ٢٠١٨

ملاحظة

I should have added that a strong break below 8k could invalidate the idea that we get a strong bounce here though support between $7800 and $8000 looks to be very strong so we might get some movement lower into the $7900 level if volume doesn't pick up above 8k.

Volume has been weak in the move from $8300 to below $8100 and short positions have decreased on Bitfinex which suggests profit taking or closing of positions due to uncertainty at current price levels. This doesn't signal overall market bearishness though ask spoofing appears to be very significant. If the buy walls at 7.8k to 8k evaporate then we might see a rapid decline on rising volume but this seems like a lower probability scenario at this point based on indicators.

On the other hand, LTC is now revisiting the upper line of the major descending channel off the ATH, i.e. the major descending trendline. A break lower here could open up a significant decline in LTCUSD. XMRUSD is also testing the middle of its major descending channel. A break lower here would open up a move to the bottom of the channel which could see a retest of the $150 level.

XMR volume has fallen off dramatically since the various hard forks from the last few months and it seems to be hanging on desperately to BTC's moves and/or low liquidity market manipulation.

Given the passing of the $8430 level on the sharp descending channel we're in the next possible indication of a possible breakout would be $8250 which would be the upper channel line within the next 24 hours or so.

Since the last 4 hr closed just below the major support line/bottom line of this large descending channel we'll also need to watch for a significant failure here or at least a rapid increase in sell volume combined with a rapid disappearance in support at 8k.

١٨ مايو ٢٠١٨

ملاحظة

While I think there is upside from the current decline I've cleaned up my charts into a new GDAX chart to better show distinct longer duration trends with a few of the more recent trends and this recent rally clearly looks like a bull trap.

١٨ مايو ٢٠١٨

ملاحظة

Looking at 200 EMA it's notable to see how trading range is converging around the 200 EMA with 200 EMA running right along the 50th percentile of the recent post 8k breakout trading range.

Given the narrowing convergence of the range one would expect a move back up rather than a deeper decline here with a much bigger move coming as market uncertainty narrows more and declining volume/liquidity allows a sudden change in volume to move the market much more explosively in either direction (i.e. a breakout/breakdown).

This would be consistent with the proposed converging triangle though Peter Brandt thinks we're on the 4th touch and could see a continuation. In general sym triangles reflect market uncertainty in overall direction so a pattern of narrowing trading range isn't necessarily going to break one way or the other without some combination of indicators, patterns, and/or external factors.

Given recent news and sentiment there haven't been any particularly strong triggers to the downside and declining volume/volatility have limited upside potential as well.

١٨ مايو ٢٠١٨

ملاحظة

Considering the time intervals between trades it seems that we've got some more time before the start of another bearish trend. However, it seems clear that a bullish breakout is unlikely given current market sentiment.

١٨ مايو ٢٠١٨

ملاحظة

By "bullish breakout" I mean a move above $11700.

١٩ مايو ٢٠١٨

ملاحظة

At current prices around $8200 risk:reward is almost 1:1 which would explain the extreme drop in volume as the market is reaching a boiling point over the direction in which the market will break.

Based on RSI convergence signals and what appears to be a descending wedge bearish pressure seems too weak to cause a dramatic breakdown here. Perhaps what we'll see is a short squeeze scenario as short positions dramatically increased in the last day despite only a very small increase in price though it doesn't seem like the buying pressure from a short squeeze could really drive a $1000 move like before.

Notably, price action has now moved right on the midpoint of this larger pennant at just below $8200 and a break in either direction could see a big boost in volume in the next day or two.

١٩ مايو ٢٠١٨

ملاحظة

١٩ مايو ٢٠١٨

ملاحظة

Volume has really bottomed out as the market appears to lack a compelling force to push things one way or the other. Right now the market is probably "leaning" one way based on indicators but needs a momentum push to draw those leaning that direction. So far, the failure to hit 10k seems to be dampening expectations to the point that few participants are willing to bet on another bullish rally so perhaps we'll just see an extremely boring sideways price action for a while.

١٩ مايو ٢٠١٨

ملاحظة

If the market can maintain this sideways price action by tomorrow evening we will have entered a high volatility zone between the ascending channel from the recent low around $6500 and the sharp descending channel that breaks the rally.

So by tomorrow evening we should start to seeing price either hang off the bottom of the ascending channel, follow the descending channel lower, or possibly bounce between the two channel lines.

An ideal way to trade these movements is to have a hedged position so if you haven't already taken both a long and a short position yet then the short target would be around $8500 and the long target around $7900 with $200 stops for roughly 3:1 reward:risk. While the market is short biased with 4 hr RSI convergence the goal here is to continuously take some profit while maintaining a hedged position.

١٩ مايو ٢٠١٨

ملاحظة

I should have said while the market is short biased 4 hr RSI convergence being signaled could lead to a large momentum breakout which could lead to a better overall short entry if one has not already been taken at a higher price > $9400.

١٩ مايو ٢٠١٨

ملاحظة

The move to nearly $8400 appears to be a low liquidity short squeeze as short positions dramatically gapped lower possibly due to stops / positions being closed. Volume has increased but only slightly as we're now hitting the top of the descending channel. A move above this channel could push the market back into the large ascending channel that would open up the $9200 to $9500 zone.

٢٠ مايو ٢٠١٨

ملاحظة

Having failed to break above the descending channel or breakout from the wedge the market is again testing the upper channel line to break back into one of the ascending channels slightly higher.

A failure here could trigger a more bearish response from the market as short have been increasing again despite absurdly low volume.

٢١ مايو ٢٠١٨

ملاحظة

On the 1 hr chart you can see that the market broke above the descending channel line then retested the line before breaking higher above $8500.

٢١ مايو ٢٠١٨

ملاحظة

I should have added that it broke higher into the major ascending channel (red) from the recent low. Having had some time since that break into the channel we're now seeing a possible failure here as I had predicted earlier (above) going into a potential "high volatility" area where we might see some bouncing between the ascending and descending channels.

Given the low volume it would help to see some indicator signals but only 15 min RSI has signaled divergence (in GDAX) which suggests a bump higher could be possible. 30 min ADX is showing a positive trend over 60 which suggests the risk:reward for going long here has poor probability of a profitable outcome.

As I suggested earlier this $8500 level appears to be a promising level for a short. However, the new major descending trendline between the ATH and the recent high of almost 10k suggests we might see a retest at around $8850 which is where the major ascending trend off the recent low (bottom red channel line) meets the upper channel line of this major descending blue channel. The upper triangle line also meets the bottom red channel line at around $9200. Perhaps the proximity of these two targets will turn the market around sooner than expected.

Currently, the market is riding the bottom of two ascending channels (blue and red) that seem to be providing support, with the blue being the post 8k breakout channel and the red being the channel from the recent low around $6500. Moving past where these lines intersect should open up the market to more volatility.

My 1 hr GDAX chart doesn't show RSI divergence but my Bitfinex is suggesting it. Combined with the 30 min ADX and the lack of volume to move higher off these two lower channel lines it seems reasonable to expect a move back to test the top of the previous sharp descending channel line (green) at about $8200. With a possible upside move to $8500 this makes a trade here look relatively poor either way in risk:reward though you could argue that we're still closer to the top of the trading range in this descending channel and a short-bias makes more sense overall.

Now that this new descending trendline has been defined it seems reasonable for it to be tested again, but after the descending trendline off the ATH was formed we didn't get a retest for 2 months while the market tanked to 6k before rebounding back to retest the top of the channel at 11.8k.

After the second peak to form the new descending trendline there was no divergence indicator as market panic quickly pushed the market into a serious correction. As 4 hr convergence was signaled at around $8500 this only led to a mild rebound of about $1000 followed by the rapid dip to 6k.

Given the similarity here and with the previous sharp decline and the continued weak sentiment (declining Google Search trend over the last 30 and 90 day periods and no rebound in the 12 month period) an overall short position with a tight stop makes more sense than a long position or a short-biased hedged position would make more sense than a long-biased hedged position.

٢١ مايو ٢٠١٨

ملاحظة

In general, given weak sentiment it seems highly unlikely that we'll see sustained momentum above 10k (or at least 11.5k) anytime soon unless some extremely favorable news comes out to trigger the market similar to the Gemini announcement triggering a major pump in ZECUSD (Zcash).

Given the significant dip in ZECUSD liquidity following their pump one would expect a massive correction and/or highly favorable short opportunity (relative to BTC) should the overall crypto market continue to correct. One would expect ZECUSD moving to Gemini to subject any unusual trading activity to a high level of scrutinty, which makes it seem relatively unlikely that ZEC stakeholders would be able to manipulate the market to keep the price from regressing in another wave of selling.

That being said it's not that easy to short ZEC so price could stay inflated much like BCH with the concentration of ZEC stakeholders moving (in my guess) relatively few coins in draw downs.

٢٢ مايو ٢٠١٨

ملاحظة

As the short entry of around $8500 has played out as expected, we're now seeing a test of the previous upper channel descending trendline. The 45 min candle still has over 20 min to close so if we see a close lower then volume might pick up substantially for a deeper sell off.

Currently, the battle for 7.8k-8k appears to be holding up though volume really doesn't suggest a great deal of market enthusiasm for buying at 8k.

Also, the speed in which price broke below the upper channel line suggests that there wasn't really much support there (or shorts taking profit).

Based on 5 min RSI it seems improbable that we don't get a slight bounce here but the more theoretically optimal entry would be somewhere along the midpoint of this descending channel maybe around $7600.

With that being said, as price enters this lower zone again the market is looking for a response to 4 hr RSI convergence being signaled. A lot of sideways price action could be a favorable signal but a strong failure here would invalidate this and drive RSI much lower than it is currently.

The more classical expectation overall is that a big triangle is forming and if we're seeing continuation here then a move below the lower triangle line will be expected. With that being said, the market still lacks convincing momentum either way and this whole triangle could end up being invalidated by sideways price action.

٢٢ مايو ٢٠١٨

ملاحظة

If one had been short at $8500 then this will be an ideal place to take some profit. Given the likelihood of going lower I would set a stop on the remaining position but avoid entering a long position or closing out this position unless we see a momentum breakout off of some clear support.

٢٢ مايو ٢٠١٨

ملاحظة

Also, looking at GDAX order books it's pretty clear that bearish spoofing pressure is much greater than anything noticeable on the buy side. That doesn't necessarily mean anything since most of that volume doesn't get executed but patience here will be valuable.

٢٢ مايو ٢٠١٨

ملاحظة

I should also add that while BTC has a bit of room to dip before hitting the previous descending trendline XMR, LTC, ZEC all appear to be breaking down in very poor areas that could lead to significantly larger corrections should a bounce not happen fairly soon.

٢٣ مايو ٢٠١٨

ملاحظة

Now that we have somewhat of a "bottom" to reference between $7800 and $7900 with a continued signaling of 4 hr RSI convergence we can see if this bottom channel line holds up. I adjusted it slightly but overall it's more or less the same.

Notably, shorts have taken a big jump in the last day and that could be a miscalculation that leads to a big momentum spike as the overall indicators are suggesting a reversal is due soon.





On the 4 hr chart we can see the previous RSI low was hit around $8300 and now with 4 hr convergence signaling over the past 11 days we might see one or two more days of sideways price action as volume ramps up before a more significant return of volatility.

٢٣ مايو ٢٠١٨

ملاحظة

In this chart you can see that previous RSI lows at the level recently hit have all been followed by fairly significant reversals of double digit percentages.

٢٣ مايو ٢٠١٨

ملاحظة

٢٣ مايو ٢٠١٨

ملاحظة

Other coins with similar price action such as LTCUSD, ETHUSD, and XMRUSD also appear to have large triangle patterns though the ETH one is much smaller and appears to be more of a bullish formation since it is coming from a positive trend. XMRUSD also appears more bullish while LTCUSD looks almost like a descending triangle, which would be bearish.

Overall, without over interpreting these patterns the general idea here is that trading range is narrowing and volatility has fallen significantly as the market has become more uncertain about direction. This does open up the market for manipulation during low volume periods but noteably there wasn't significant price action as volume fell to some of the lowest levels seen this year.

٢٣ مايو ٢٠١٨

ملاحظة

Interestingly, short positions have started to reverse their recent gains in the last 4 hr candle which hasn't really seen significant price action.

٢٣ مايو ٢٠١٨

ملاحظة

With the market quickly breaking the lower channel line to enter sub $7500 levels 4 hr RSI convergence has been invalidated. With 4 hr RSI still very low the possibility of a reversal looks strong but now the process of identifying a bottom begins again. At the current price level roughly in the middle of the sharply descending green channel at about $7580 we've seen only weak momentum of between 1.5% and 2.5% following a decline of nearly 12% over the last 48 hours.

Much of the market is still waiting for a clear sign of a bottom forming though with volume rising there is bearish momentum now, which suggests a lower low is probable.

Notable too is that short positions have closed significantly indicating profit taking so the potential for a short squeeze has been reduced significantly.

I thought we might see the bottom channel tested for a longer duration but it seems that a double top was formed off the middle of this channel and a failure to reverse more strongly for a second time led to a sell off and bulls losing faith in the market.

٢٣ مايو ٢٠١٨

ملاحظة

With the bottom of this triangle very close now the danger here is that the market will hit this line and a failure here could lead to a significant decline. Given the low sentiment in the market either way that outcome isn't certain but ideally one would still have a riskless open short position(s) from $8500 to $9800 that could be hedged should the market hit that zone of $7300 in the next few days.

٢٤ مايو ٢٠١٨

ملاحظة

My general dilemma here is that despite the very bad news coming out on Bloomberg and the expectation that we might see a continued drop on rising volume based on this news, the general technical view is that this is a terrible place to go short and it makes much more sense to go long with a tight stop or wait for some confirmation of a bottoming.

Even though there is some room for profit the risk:reward just doesn't make sense so we might see some risk being taken off the table but overall the market already has been bearish and much of the price uncertainty due to price manipulation could have already been priced in long ago.

٢٤ مايو ٢٠١٨

ملاحظة

I would be looking for some signs of convergence or a momentum breakdown below $7320. On the first break below this there was strong support but the market isn't convinced enough to buy in above $7400. If one had shorted above $8500 then this isn't really a consideration but now the question is whether to go long to hedge the short or to wait and see for a better entry. Probably best to wait and see.

٢٤ مايو ٢٠١٨

ملاحظة

Notably short positions have really dipped lower in the last hour of sideways price action around $7300. On the other hand, I'm seeing a lot of resistance now. My feeling is that with 1 hr left for the 4 hr candle to close we'll see quite a bit of back and forth on growing volume right around $7300 where a reversal would invalidate the triangle for now and a breakdown could open up a much bigger decline.

With RSI convergence signaling on all timescales below 3 hr everything still points to a bounce here but the problem is the external trigger could outweigh the technicals and indicators or at least dampen them enough for the market to breakdown more. Perhaps a follow-up from the CFTC clarifying the situation will push the market one way or the other. Usually, these Bloomberg pieces tend to be very poorly sourced and in this case the uncertainty and lack of detail in the reporting is likely keeping prices relatively higher than they might be if the reporting sounded much more serious or official.

٢٤ مايو ٢٠١٨

ملاحظة

from the recent move to about $955 Bitcoin Cash reversed almost 6.5%, which is pretty crazy when Bitcoin only reversed under 3%.

٢٥ مايو ٢٠١٨

ملاحظة

The one thing you can really grasp quickly when looking at the shorts chart is that BTCUSD has become much less volatile, and that's reflected objectively in the narrowing range of the large triangle that we've been in.

You can see prior to the low around $6500 there had been a lot of volatility, even at the bottom, with short positions continuing to be taken even though the price appeared to have bottomed. Then we had an explosive reversal probably fueled by a short squeeze combined with momentum and then things got boring again.

You can see that short positions have moved within one of the tightest ranges in the chart history over the last month, reflecting the relatively weak sentiment driving the market in either direction.

٢٥ مايو ٢٠١٨

ملاحظة

The charts indicated the $7300 level as a buy zone and that's been reflected in the strong volatility off of that area. However, a lack of momentum to push above $7700 clearly indicates a lack of conviction in the market. It's hard to say if the Bloomberg piece really had that much of an impact, but perhaps if the Bloomberg piece had been timed earlier, when the market was already falling, we would've seen a better alignment in the market to reverse here with more momentum.

It is a holiday weekend in the US and it would be generally make sense for the market to dip again or move sideways through at least Monday, possibly allowing a longer duration RSI convergence signal to form.

So far, the market has continued to track the middle of the green channel and the lower channel line of the pink channel. Should we see $7350 again by sometime tomorrow afternoon then we might see a definitive indication that the market is reversing as it comes across the bottom of this triangle again.

4 hr ADX suggests this general zone as an entry point (take profit point for shorts) to go long but in consideration of the declining volume and the intersection between the descending channels and the bottom of the triangle tomorrow it makes sense to wait one more day to observe whether the market follows the predicted price action.

٢٥ مايو ٢٠١٨

ملاحظة

In reviewing the chart I just posted there definitely seems to be a path of least resistance for bulls in the next 12-15 hours if the market can break above the $7800 level where the two upper descending channel lines intersect. This would drop the market into what could be a wedge like pattern that could then break higher to above the halfway point of the move from $9950 to $7300 at the top of the large blue descending channel. Given the strong resistance here it seems like a plausible place to reverse though the upper triangle line is slightly higher this would be the main target.

It still seems plausible that the weekend might not see enough volume coming into the market for this to play out but it's probably worth taking a very small position, like a 1/4 of "normal" position with a fairly wide stop of $500.

٢٥ مايو ٢٠١٨

ملاحظة

After looking at the chart again I'm seeing this small bear flag, which is probably too small to have a large impact on the market, but $7500 appears to be the middle of this range that we're in so there's probably time to observe the price action play out for another day or two. Given my ambivalence about taking a long position here it's probably best to wait for better indicators.

٨ يونيو ٢٠١٨

ملاحظة

I haven't commented recently because the direction of the market is still generally unclear. I wrote this a week or more ago but most of the sentiment is still relevant. I had been contemplating a short strategy around $7500 but the risk:reward wasn't so convincing based on the indicators. 1 D ADX is suggesting a buy but 4 hr ADX is ambivalent. Short positions (Bitfinex) have broken out of the tight narrow descending range they were in which suggests price could move up a bit more. Overall, the market as a whole seems to be taking a "wait and see" approach and no position right now could be the best strategy. Or you could trade other things like EURUSD or TSLA options.

What we saw at just below $7100 was a stronger 4 hr RSI convergence and combined with low liquidity during the very early hours of May 29th and a 1 D RSI of 30 there was enough momentum to drive a break back to $7500. Failing to sustain that momentum led to sell off to $7300 where the market continues to try and fails to sustain any momentum whatsoever in either direction.

The 4 hr ADX peak reverted without any sustained move which perhaps had something to do with the negative Bloomberg report or uncertainty regarding manipulation in the market. Either way, sentiment has moved lower over the past 90 days based on Google Search trends alone but normally technical trading would drive a reversal after a 4 hr ADX peak above 55. In the past flash crashes have led to false signaling but in this case that doesn't appear to be relevant.

٨ يونيو ٢٠١٨

ملاحظة

٨ يونيو ٢٠١٨

ملاحظة

One thing to note is that I'm still short biased on this market as my overall position taking has been selling between $8500 and $9700. In general the market still seems very weak based on sentiment and I wouldn't be taking a lot of risk on a relatively shaky asset class or if you're a miner and are already carrying a lot of risk then you should focus on hedging rather than looking to double down. There will be a time when a reversal becomes a lot more evident, probably after we get an extended and strong 1 D convergence signal.

This would require a push below 6k and if we see a break below this current triangle to perhaps $6700 then the market could breakdown significantly more.

At the current price level there's ambiguity but a relatively small short position would give you some extra profit padding rather than waiting for a dip below $7550 or lower where more momentum could chase things lower.

Overall, it looks like we're getting a weak double top, which means we might just continue to go sideways for a bit but given the extremely low volume it would make sense that the market breaks one way or the other before or during the weekend.

١١ يونيو ٢٠١٨

ملاحظة

Having hit the primary shgort target (above $6700) this would be an ideal place to take profit as several signs point to a reversal here.

4 hr DI- has spiked to 55, much higher than the previous negative trend. 4 hr RSI has hit below 15, much lower than previous dips. None of these are "buy" signals but if you had taken a short at $7650 or higher then you should be taking some more profit here as the next move could lead to a 4 hr convergence signal. This seems likely to happen after a slight reversal period from the ~$6700 low.

Since 1 D RSI has touched 30 once again it seems that 1 D convergence will be impossible unless we see a decent reversal here. Notably, at $6700, as I had mentioned in the last comment, the market was looking for a break lower and it didn't happen which would have been an ideal place to take profit/go long/hedge your short.