Topic: Did anyone notist that bitcoin had done this before? (Read 1752 times)

Too late. 

HAHA, don't lose your marbles!

Deep analysis of trendlines unveils a bright future of fun!

Thanks for joining in!  I need someone with experience to keep me in check. 


I should change one thing I said:  These are my rules, not The Rules.  The market would shake to pieces if everyone started using exactly the same formula everywhere. 


I should clarify 3: I don't have a problem with drawing trendlines out way past their defining points, even decades.  I DO care about the ratio of (distance we extrapolate) : (distance between the points).  What ratio is acceptable depends on what you're charting, how many points you use, and if there are any changes in the fundamentals.

DJI is a massive index and trends will be valid as long as there are no extreme shifts in national policy.  You can extrapolate out 2:1 unless the US decides to dissolve itself and the states are joining the EU.  More than that and you have to look at the long-term economy, but it still has some predictive power.  This is silly to compare to BTC.

Let's try something more speculative and volatile:  Yahoo.



Let me introduce Rule 5:  Trendlines come in pairs.  If you can't see the channel, there isn't a channel.

The red lines are how I see it.  Bubble, blowoff, normal, good times, losing our way, "I'm not dead yet!".  Clear, tightly-defined, multi-year trends.

The purple line is analogous to the lines in the OP: we're taking two points and trying to predict the future despite the dot com bubble, changes of the company's direction and competition, and other significant outside effects happening in there.  Do two points in 1997-2002 really predict that Yahoo would blow it on earnings in 2008Q3?  If that bottom in 2002 was higher and we had 3 neat points in 1997-2001-2002, and we were watching this develop, should we be expecting Yahoo to screw up in 2007 instead?  I think the purple line is silly, and all the things that happened to Yahoo over the years made it completely irrelevant.

The green lines are creepy.  It's a decade-long triangle!  I think they're meaningless, but they fit surprisingly well.


That's how I do it!  Look again:



I don't insist that the channel is perfectly parallel, though closer is better.  I extrapolate backward when I can see that a trend started before the first top or bottom (foolish if I was trading on technicals, but I have the benefit of hindsight).  And I draw channels a little narrower (notably August, again with hindsight benefit; and I clip wicks).

Aside from those style differences, do you see a problem with my lines?  I think they're a pretty fair view given my assumption that trends are shorter and that more recent changes in fundamentals trump technicals extrapolated from last year.


That's an awfully strong conclusion to draw from a trendline whose slope is defined by the handles of some rather tall hammers that were formed by some block dumps into thin depth and wide spreads...  By what possible mechanism would those ephemeral patterns predict something so precisely that far in the future?  Did you call this before, or are you too drawing lines with the benefit of hindsight?

You can draw the trend from several other nearby lows to reach other conclusions:



Blue my way, purple your way, and orange showing the hazards of extrapolating long distances from long shadows, especially on log charts where brief blips of downside can throw the slope off.


Of course!  Have a look at my original chart again.  On my last trend the current crash is similar to the whole series over the last four months.  Flat for a while until we start approaching the resistance line, crash, slight rebound, level out.  It slightly breaks my trendline, but from the level-off, I'd say it's just going to regress back to the channel by holding the current price a little while.

I'm looking at the same things you are...  I just do it from a background of fundamentals which are telling me the trends are shorter than you see them.

Great to engage with you in this meaty discussion.

I agree with you on points 1)+2), not exactly on rules 3) + 4). Overall, this is an art as you are indicating and no one does this exactly the same. And this is why we will very likely not agree with each other on any chart, and this is fine. In the end, what really counts is that one is more often right than wrong.

Now to the charts:

On rule 3) and 4) Many trendlines, including the 40 year log DJI chart, even work long time after the trendlines have been touched. I have many more examples.

The way you have drawn the trendlines is not really accurate.

(i) When drawing trendlines you have to always start at the lows and connecting these first. Try to find  two significant lows and connect these. (ii) Then see whether you can find a 3rd or 4th touchpoint.
(iii) then draw a parallel trendline connecting highs. if this looks right, you have a great parallel trendchannel.
(iv) if a trendline is broken, then how will you see if this line is important? prices will accelerate the move if the line was really important.

You see this in the attached. And truly, this trendline is the most valid one, because
(a) prices have 4 or even 5 touchpoint lows
(b) the upper parallel trendline (green) also makes sense. bitcoin prices broke out of this line end April and is now back to that level
(c) prices held this line early october to Oct 15/16 and then
(d) at the EXACT time when this trendline was broken for the first time in more than a year, prices crashed -40% two days ago . This is why this line has been and still will be so crucial.

And what one should never forget: trendlines are there to be held and to be broken! When discussing trendlines, one must be aware of both, chances to hold and break and act (trade) accordingly.

Now, looking into the future, this line will either be reclaimed fast, or it will provide strong resistance. At the minimum, the underside will likely be tested soon. This is currently around 3.7-4$.


 

Ah, the ever popular and controversial log chart.  I actually like log charts for very large changes in price, so let's do it.

The rules of trendlines:

1) Trendlines are an analysis tool, not a law of nature.
2) The more points you hit, the better your line is.
3) The farther you extrapolate your line past the last point, the less predictive power it has.
4) Trendlines predict normal fluctuations.  They become irrelevant after a major market shift that permanently alters market sentiment.

The problems with your chart:

1) The line is wrong, not the trend.
2) You're only hitting two points.
3) Your lines are extrapolating farther than the distance between your points.
4) You're extrapolating past two shifts: From bull to bubble when we started getting attention in April, and from bubble to bear in June.

So let me scribble some lines that play by the rules a little better:



Last point:  No, breaking the trendline doesn't mean the trend is reversing.  It just means the trend might be over (I'm comfortable letting the price stray a little over my lines, but once it breaks hard, it's over).  And when it's broken under the support line, that means it's going down, not up.

My line gets broken at the end, too, but with the way it leveled off I think it's a false break (see rule 1) due to panic selling, and that it'll drift back into the channel and continue the general bearish trend of the last four months.  But it's still too early to tell.

Why do we believe that the trendline we have on the blog was the best way and most valid one?

because exactly at the poinz when prices penetrated this very line the decline accelerated big time.

this happened two days ago when prices declined about 40%.

this shows how important the log scale  trendline was.

If prices climb again above that line the trend can continue. To do so bitcoin prices need to rise above 3.7-4$

Thus is nothing but impossible in the event of a short squeeze or a couple if folks with enough funds, given the low liquidity of this tiny market.

Unless this happens, there continues to be a mid term downtrend .
Either prices continue down or establish a  lower steepness if the longterm trend.

We see new support levels establishing and we will communicate those soon.

exactly, and adapt. but im still not sure if it haves any real meaning, these two random lines i drew.

"Those two trendlines I drew previously didn't work, so I'm going to 'notice' a TREND IN THE TRENDLINES!"   

+1

panic buying?

I wouldn't put so much faith in the trendlines. I'm starting to believe they are close to useless. Bitcoin price will bottom and stabilize, and if there is to be a new uptrend it will be based on real developments and increased adoption rates.

The mathematical and decentralized nature of bitcoin will show us that reiterated patterns will emerge. We know that it cannot reach 0. I suspect that the bitcoin model will be adopted by many other investment vehicles in the future.

at point A(april) bitcoin have broken the trendline before, and returned back up.

at point B(right now) bitcoin have again broken the trendline, will it return back up?



im am no analystist, and i have no idea about what im messing with. im just drawing the same lines, as anyone else.