Topic: Something, something, something, technical analysis - page 13. (Read 31170 times)

That's why I wrote


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.

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

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.

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.

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)

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

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.

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.

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.

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.

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.

Let's have a quick look at daily Ichimoku clouds, shall we?

I'm still learning the basics of it, and a part of me remains skeptic about the premises of it, mainly: the 26 day "projection" of the cloud, which seems to be based on the assumption? observation? that all markets react with a ~26 day delay... it's an interesting idea, but the skeptic in me wants to see some data on that assumption.

Anyway, here's a pattern that seems to unfold similarly now as it did about 2 weeks ago (EDIT) sorry, 6 weeks ago, around March 24:



Price drifts into the cloud (which is a prerequisite of reversing, i.e. closing above the cloud), shortly after the conversion line sees a bearish crossover with the base line (i.e. the fast average falls below the slow one), together with a delayed upwards 'jump' of the base line, which is, if I read this indicator correctly, the delayed effect (through the slower moving average of the base line) of the rally we saw around April 15 (i.e. the one that took from 340 to 550).

Note that the last time this happened, in March, price got near the base line, but failed to break through it, spent a few days (3 to 4) in the lower part of the cloud, then decisively fell out of it. My interpretation is (I am for the moment following the "delay" assumption implicit in Ichimoku analysis) that the move *into* the cloud (which can look like a bullish breakout attempt) is triggered by a delayed market reaction to the rally from about a month ago. The next necessary step however is breaking through resistances, at first the base line, then the cloud itself. Failure to do so within a few days is seen by the market as a rejection of the attempt, and leads to a sharp drop.

Applied to the current situation, we would like to see reaching the base line at ~472 today or tomorrow. That base line will inevitable fall somewhat within the next days (because the April uptrend was followed by a correction), so within the days that follow we will either see price staying above the base line, and inside the cloud (in which case we could make the case that a reversal is really underway this time), or price will fall together with the base line like it did in March, which probably means we will see another capitulation-like event.

Houbi will be gone in days, it's funny people still talk about it, what's the point 

excellent. bump.

I am also leaning to analyse primarily Huobi these days, volume on Stamp is so abysmal, sometimes the trading simply dies there or there are only miniscule transactions, just noise. BTW, price on Huobi and Stamp almost exactly equal now - imho, looks like arbitrage works.

EDIT: I have just noticed that Bitcoinwisdom's price on Huobi is more than 2 hours old. Anyone knows what is going on? Is the problem on Huobi's or Bitcoinwisdom's part? Cannot find anything in the news 

Agreed. The picture looks even a bit worse on Huobi than on Stamp.

But I don't buy the commonly repeated mantra "Only Huobi/China matters at the moment". Or rather: China might determine the price, but not in the way that people commonly imagine how it works.

If we had a complete, formal model of Bitcoin price discovery that includes a model of the separate but connected exchanges, then I would in fact fully expect that one of the results of that model would be something like "current price is determined to a larger degree by China than by, say, Bitstamp".

But that's /not/ the same as saying "Huobi determines the price, then the rest of the world follows it". The process is, imo, more complex than this, and in reality involves a mutual exchange of information between the exchanges as trading takes place.

The only clear cut case of China really setting the price that others follow is through arbitrage bots, but arbitrage is (obviously) not what determines the current price level in the first place.

Where I'm getting with this:

I don't believe there is a simple leading/following division between the exchanges, except for a few individual movements, and it is perfectly possible to read the trends on either of the exchanges.

In fact, I consider many signals to be better visible on Bitstamp than on Huobi, perhaps because of a worse signal/noise ratio on Huobi that has at least a doubtful amount of volume. I explain it to myself (this is pure conjecture now of course) by noting that human traders ultimately determine the price level, but that human trading is nearly drowned out on the Chinese exchanges during most of the day through automated trading.


To be clear, I don't dismiss Huobi for getting short-term signals, but (a) I believe I can read all the relevant signals (above, say, hourly time frame) from Bitstamp data, because price is highly correlated across the exchanges, and (b) because of the high volume of unclear origin on Huobi, it is perhaps actually better not to rely on Huobi data too much for analysis.

bullish would be a fairly quick rebound to 700+.

Why you call this scenario bearish? It is actually bullish (except short term) as it assumes that bottom has been reached already. I am actually not sure of this - that is, even more bearish.

I think its better to look at Houbi, since that is the only exchange that currently matters.





Here we can see that it has tested the 38 Fib twice and been rejected. It looks more bearish than Bitstamp.

HOWEVER - WARNING - THIS IS HOUBI - which means a sudden test of the 50% Fib at around 2900 is very likely, imho.

I'm not that impressed by our current recovery from the April 25 downwards move. We bounced off from 50% as clean as can be, are currently back to the area between 23% and 38% (i.e. the very first retracement step), and the first level, 23%, looks pretty perforated to me. Taking into account volume as well, I'm leaning towards a re-test of 43x.