Downtrend to continue: Hidden Bearish Divergence and Double Tops

27 jul 2018

Hidden bearis divergence appears to be coming up on this uptrend for the kill. Just a small primer on divergences which is a difference between the price action and a indicator (RSI or MACD)
Normal Divergence (Trend Reversal)
Bearish: Higher highs on price action but lower highs on the indicator
Bullish: Lower lows on price action but higher lows on the indicator
Hidden (Trend Continuation)
Bearish: Lower high on the price action and higher highs on the indicator
Bullish: Higher low on the price action and a lower low on the indicator

When it comes to calling tops and bottoms it is always good to use an indicator on a timeframe to confirm your top or bottom and daily works well enough for our long-term planning. I have boxed off the last two highs and we see both were double tops. I don’t want to busy the chart too much past the main point but if you drill down on a lower timeframe you will see that they both have clear regular bearish divergence develop before they break down. If this pattern continues we will have another double top and a new low (sub $5,800).

The RSI is showing clear hidden bearish divergence on these three boxed off tops. It would take a monumental amount of effort to snap through this hidden bearish divergence in a upward manner. Which suggest to me we are going back down. One the daily timeframe the MACD has subtle hidden bearish divergence on top 1 and top 2 but not between top 2 and top 3. If you look a the lower timeframes the bearish divergence becomes clear.

Comparing top 1 and top 2 we the valley between the tops was less pronounced. We may or may not see the valley follow the same pattern for top 3 so be prepared either way. This top may or may not have the same period (10-12 days) as the last top.

Final note: the chart is on the log scale and we see quite clearly this uptrend is stopping roughly were we expect based off the last two tops. If we double top we will break through this resistance but will see bearish divergence when it happens. Buyer beware.

My personal action plan is to wait to see if a third double top develops (or not) and look out for bearish divergence. We see below that we already have quite of bearish divergence on this uptrend. I hope to see the CM_Ultimate turn red on the 4 or 6h timeframe and then I’ll be going short with a relatively tight stop loss. Of course, this isn’t financial advice for you or anyone else but given how BTC might swing violently in either direction traders need to be paying more attention than normal to risk-reward ratios and how they are placing their stop losses, whether they are long or short.

If I am right, we are going below $5,800 and that puts the proposed ETF at risk. If the several institutions wanting a ETH show their hand they will be defending $5,800 and the 100B market cap of bitcoin fiercely. The conflict between TA and what you might consider fundamental analysis makes predictions around $5,800 difficult


I believe this post has me going against the vast majority of people in the market right now. People I follow here or on youtube are very bullish right now but I have not been able to fully shake bear mode. We might be testing $8.6 or 8.7k or higher before this whole thing breaks down and a lot of people might get screwed. Bears should wait for this trade to develop and bulls need to be using their stops. More than usual, comments and TA are requested and would be appreciated if you agree or disagree.

27 jul 2018

Nota

One of the thing I am going to be watching as this uptrend develops is the Hull MACD. This may develop into one of weird situations were the Hull Signal line drifts down gracefully while the price action, RSI and MACD all increase. Bearish divergences settles on the price action and RSI, we get one finale break out attempt on the H-MACD with the low amplitude oscillation that barely beaks zero and then the sell off. The slaughter is finally signaled when the daily CM_Ulitmate turns red.

I am not certain we will see another 20 day period as this top develops, I think it may be shorter. But IF the H-MACD and signal line develop as I suspect (and of course it is hard to predict how price and indicators will develop over two weeks) then things will get brutal.

The time component is important to those that want to play near the cliff for the next weekish

The 2h and 4h charts are already showing the bearish divergence that can tear this upswing to shreds but having this break apart this soon feels... too soon. I'm going to keen an eye on this for myself and I'll be looking for CM_ultimate to turn red, the divergence to break down, and I'll be using type stops to pretect myself from a false breakout.

29 jul 2018

Nota

I don't necessarily but the highest confidence on micro timeframe TA formations but it does seem we have an inverted head and shoulders that we can break through. The orange line is the 200 daily simple moving average that you have seen discussed a lot as being a critical level. If this I-H&S turns out to be legit we will break through the 200 and optimism will be extraordinarily high. My bearish sentiment won't be negated until I see Peak 3 above Peak 2, until then, we are still likely to go sub $5,800.

This will need to be watched for normal bearish divergence and breakdown over the next 5-7 days.



P.S. I had to paint the daily 200 SMA onto the chart then go down to the 15m timeframe. If there is a better technical way to have a different time frame sma on your chart (in this example, the daily on the 15, please let me know).

29 jul 2018

Nota

The I-H&S continues to develop. We see the volume profile we would expect, with the left shoulder having the greatest amount of volume, then the formation of the main shots down and up for the head, and now declining volume along the right shoulder. The fact that the right shoulder is weaker than the left shoulder is promising as well. In fact, it barely looks like a shoulder on the 4h if you don't include the wicks. In fact, without the volume profile I wouldn't think this formation was anything.

30 jul 2018

Nota

Looks like the I-H&S failed to perform and lead to a breakdown. In the yellow area we see the bulls gave two great efforts to get this bullish pattern to take off but there were just not enough orders between 8200 and 8300 to get this going. Or, there was such a great amount of profit taking that this I-H&S was scalped to death. The green, red, green candles here shows me that there were a lot of bulls that saw the I-H&S too but the interest, the additional money (people fomoing, buy stops and the like) just didn't materialize.


Since then, the blue arrow points to very low amplitude bounces (dig down to micro timeframes to see that) on the price action, another attempt by bulls test interest and it seems it isn't there, there isn't enough new money coming in right now. This appears to confirm the overall point of my original post: Hidden bearish divergence will cause the price to continue to decline.

On the daily we see the RSI is rounding off. The red areas are where the RSI has rounded off and dumped previously to end a uptrend and the green shows where we rounded off at a bottom and went up. It looks like we established our new high and I am finally in short with a stop loss at 8250. We might see some more thrashing about as the bulls and bears fight and if that happens I don't want to have my order on the books. Usually I am hesitant to put such a tight stop on for crypto but given what I am seeing I don't think I will get "wicked out" and if I am wrong I really don't want to be taken on a ride.


The TA puts our new bottom below $5,800 and a market cap of 100B. If the institutions that want to issue a ETF defend the $5,800 area we might see either a whole lot of support there or our new bottom there. But we very well may see the institutions just let the market cap fall and price fall so they won't have to worry keeping it up because they can just wait a year or two where $5,800 is off the table because it is so far behind us.

If I am right we should see a whole lot of people start talking about what was in the charts already, the hidden bearish divergence, it will get out into the publications, the youtube channels, other people's charting and then the this dump will snowball. Three is a pretty important number in trading. Three points of contact for support and resistance, 3 points of contact for ascending and descending triangles, etc. We now have three peaks and they show a pattern of hidden bearish divergence, the descending triangle is back in play.

I could see still being bullish for a few days. I think very few people will be bullish the next week.

1 ago 2018

Nota

We had a bearish cross on the daily MACD which makes almost impossible that we will see a double top out of this most recent peak. The final signal I would say for the most conservative trader in this system I have put out would be the CM_Ulitmate turning red on the daily timeframe.