1 D RSI/MACD Convergence Signaled but 1 D Candle Close Needed

We're a bit less than 9 hours away from the next candle close (UTC) and 1 D RSI Convergence has signaled from the previous low of ~$6900 on Feb. 6 to 54 days later, but we may not get confirmation for possibly 2 candles before a big momentum reversal.

Clearly, at $6500, momentum and volume have been weak, which suggests we could see an eventual and stronger breakdown here before we see a stronger momentum reversal. Compare for example to Mar 29 9:55 PM (UTC) where we saw a very strong momentum reversal at the dip with 5 min RSI Convergence. Here at about $6450 we've also seen 5 min RSI Convergence but very weak momentum with price barely touching $6550 off a low of $6457, for only a 1.44% bounce. It's fair to say the market is waiting this time around for more confirmation after the previous strong dip to confirm a bottom. In general, the stronger the dip, the stronger the reversal, and so far, we've seen a fairly gradual move from yesterday's high of around $7200 to $6500, just less than a 10% change.

It's notable that the peak at $7200 was also indicated by 5 min RSI Divergence and saw three touches off the same resistance before reversing to the lower line of the pennant/triangle pattern. Here, a good short opportunity could have been taken with a target of the next level signaling 5 min RSI Convergence given the knowledge of a likely pattern breakdown and repeated failure to break resistance with RSI Divergence signaled. Taking 50% profit at ~6700 would have generated nearly 7% profits. Then a secondary target (if you were willing to hold this position through the middle of the night, i.e. super RISKY) could have been in the $6400-$6500 range. Since 5 min RSI Divergence was signaled just below $6500 we could have taken another 25% (or even 50%) profit here, which would be a 9.7% move from $7200. Given the likelihood of a strong bounce coming soon it seems wise to close out the position here. Order book sell pressure seems to confirm that the risk:reward at this stage becomes fairly low for a continued short given the signaling for 1 D RSI Convergence.

An additional pattern that is appearing is a wedge that would require a breakout above about $7200 which was previously strong resistance. This combined with 1 D RSI Convergence momentum could result in a big move from the $5800 to $6500 range depending on candle closes in the next day or two.

註釋

A failure at the major support here around $6450-$6500 likely won't result in a big drop because the support of the mid-channel line runs right below the trendline between the last dip at $7400 to the current dip.

Below $6400 we could see a stronger move to $6200 or the lower channel trendline. Two major trendlines intersect below including the huge channel we've been mostly moving within since Feb. 17 when we saw the last peak. These trendlines confirm major support between $6000 and $6200.

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Big momentum now.

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So about $200 in 9 minutes.

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3.1% in 9 minutes. A failure at the major support on a longer duration chart would also invalidate the larger wedge idea.

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This momentum has now pushed up to the strong resistance at about $6800. Clearly, some ill-advised shorts stopping out could have helped here since volume is still extremely low.

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Not sure what to attribute that breakout to but 15 min RSI Convergence and 2-3 hr RSI Convergence have been signaling now for days so a 5.4% move in 15 min made sense. Here I should have taken a small position as I usually do in anticipation of smaller timescale RSI Convergence moves but I'm trying to play the bigger move.

A 1 D close here above $6900 would invalidate RSI Convergence so clearly TOO much momentum too early could mean momentum fails to consolidate for the signal confirmation.

This seemed to be the case last time with the huge breakout on 4 hr RSI Convergence as we got a pretty big move on the 4 hr, followed by a large dip that shook out a lot right before we saw a few bars of lower momentum before finally the big breakout.

Given that we're so close to the bottom some pre-positioning, maybe 50%, might be warranted.

I don't think we've confirmed a bottom quite yet as we need 3.5 more hours to confirm this big green candle so anything can happen, likely a period of consolidation.

註釋

This big momentum trigger should be scaring bears into not taking shorts so we're likely to start seeing less resistance and more support in the $6100 to $6400 range as fear of a reversal here is starting to grow and a sense of the "bottom" starts to swing the market overwhelmingly more towards buying than selling.

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The RSI Strategy signal already suggested convergence here so the market likely will turn around now on the 5 min chart.

Still, $400, or about 6.2% in less than 40 min is pretty amazing. Feel kind of dumb now though momentum wasn't where I expected it to be.

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I had previously posted some buy orders between $64000 and $6550 which would have been profitable. Clearly, I failed to take on any risk when I should've gone with the 1/2 rule, which is to go in at 1/2 normal position size if there's a fear of too much risk.

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I've read that you should wait for confirmation prior to taking risk and I'm starting to question this practice because it really seems to come down to about the same risk probabilities as going in 1/2 based on expectations and then waiting for confirmation and going in the other half rather than just waiting for confirmation and possibly only getting 1/2 the profit by market buying into a momentum move.

I feel like this overall risk aversion leads to poor results though in this case I should have just hit market buy when I saw the break.

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On the other hand, since I'm definitely looking for the swing trade here rather than smaller opportunities, I need to keep in mind that taking risk on a relatively small opportunity could mean missing the window on a bigger opportunity or missing bigger profit that would encompass this smaller trade on the bigger move.

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So if we're looking at 6% from $6450 to $6850, or an additional 6% move from below $6450 then it makes sense to go in 1/2 at the first potential target, take profit, and then wait for the secondary confirmation. This optimizes for higher return than sitting out one trade only to wait for a second that may or may not materialize as planned.

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Looking at 4 hr RSI it looks like convergence was signaled between March 8 and now, which could mean we see a much bigger run before another dip lower to confirm 1 D convergence.

With that being said, an entry at this level seems like poor risk reward if we presume upside of about $7250 and downside from $6824 of about $6000 or about 6% down to 12% up.

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2-4 hr RSI Convergence definitely seems to be pushing this momentum but the breakdown below 7k could help confirm 1 D RSI Convergence. 4 more hours before the 1 D candle closes. Then another strong momentum push after that could do it though this is a very weak dip overall into the 1 D RSI convergence reversal so we may need a sharper dip lower.

Given this current rally the order books are pretty empty so there's definitely some expectation now that we could see 6k should this current rally fail to break 7k.

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So overall we're still looking at 1-2 days before we can confirm a "bottom".

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Some notes on entry price targets:

Given expectations of a rebound here based on indicators it seemed reasonable to look for an entry prior to a breakout confirmation. In my experience the waiting for confirmation method is poor because you end up with a much higher price and take on much higher risk if the breakout momentum ends up weak or the market has been manipulated. Better to shoot for entry on the way down with some understanding of where the market will bounce and what indicators have already signaled a potential reversal and what entry level will work based on order books and chart support levels.

It seems like as usual with expectations of support at $6500, the market overreacted but not quite enough to hit $6400, which wasn't as strong a support level.

It makes sense to target the main support price +/- 0.75% so that would have been $6451, $6500, and 6548. This would have been 100% hit.

Or another possibility is targeting more granular price levels, so 6451 6475 6500 6524 6548 with a distribution weighted towards the lower end, so maybe 80% of total position size at $6500 or less and the rest at the two higher targets.

Or maybe instead of more concentrated position increase the distribution if you're less certain about your target entry.

So maybe $6402, $6451, $6500, and $6548

In this case $6402 would have been missed so it would be $6493 avg. price (if my math is correct) with a .533 distribution of the total target position allocated to $6451 and $6500 and 0.2 of total target position allocated to $6548. If we assume 6 BTC total position that would be 1.6, 1.6, and 1.2 since the last 1.6 would be missed.

If I used the more granular targeted price the avg. would be $6487 with the full position size.

The more granular target will definitely increase risk if your price target is wrong, but it does result in a slightly lower average price.

Given better than 50% odds of predicting the correct target (say 60%), then using the granular target would result in higher net gains depending on the risk:reward expectations.

With target exit of 7k and downside risk of 6.2k, at ~6.5k, the reward:risk ratio is $500 : $300, so 1.67 so not great but not terrible either.

If we presume 60% win and 40% lose probability then that results in expected gain of 180/BTC. With 50/50 probability then the expected gain is 100/BTC.

註釋

1 D RSI/MACD convergence faintly hinted, but probably not strong enough a signal to trigger a bigger rally.

Only 55 days have passed between the previous low and the current low and the price change has been fairly minimal. My expectation was a slightly bigger dip, which would have triggered more volume and momentum in the market.

The momentum we saw today has been extremely weak, especially by historical standards for a bottom. We could see a slow reversal given the persistent low liquidity and the fairly low risk:reward for shorting between 6.5k and 7k.

2-3 hr RSI/MACD convergence has signaled for quite a few days, but it seems like the expectation of a bigger move hasn't materialized. For the most part this just means we're going sideways, which is clear from looking at the 1 D chart.

I would be watching out for big RSI divergence signals on the 30 min to 1 hr charts as this could signal the start of a stronger reversal.

Clearly, 7k is proving difficult to break so overall the market might need some external trigger to bump things higher (or lower).

註釋

While the small pennant/triangle resulted in a breakdown and dip to the 6400s with a strong momentum breakout, the price has come right back to the bottom of this pennant/triangle and is now struggling to break back through. If price continues to ascend this line then it could see a break back into the blue descending channel, which while descending, is moving more sideways overall. This would require breaking two additional resistance levels in addition to the current one.

As I'm typing this we're seeing a breakdown to $6900, but below this we have a trendline with decent support at about $6850 then $6700, then the top of the pink channel, which we broke out of at around $6500-$6570 on the 5 min charts.

So we could be stuck going sideways for a while.

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By a while I don't necessarily mean more than a day. We could see some price action playing out again in the next 20 hours.

Overall, we've moved mostly sideways with significant volatility, which is great for trading if you catch the right moves. Each day there's been at least one killer move and then a few others that were higher risk. As volume, momentum, and liquidity drop you start to see fewer high reward, low risk opportunities that allow getting in and out quickly.

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The other thing that's notable is that in the past during very strong downward moves we've seen 1 D RSI Strategy triggered. This happened on the first big dip to below 6k and then in the past at the beginning of the Aug. 2015 bear market reversal. While the RSI Strategy isn't reliable on its own it does provide some confirmation of a bottom in combination with other indicators and factors.

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Looking at 1 min charts you can better get a sense of what's going on, clearly a series of pennants/triangles, which overall looks bullish and as i write this it looks like we might be breaking 7k through the tip of the original larger pennant.

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This series of pennants appears to be part of a larger triangle formation. Should $7100 continue to be strong resistance then this will end up being a large continuation pattern.

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Price has broken $7100 but on extremely low volume. Though volume is technically "increasing," I'm pretty suspicious of this price move given that it took three days and the volume had to dip so low that there's almost no liquidity, which means prices are easier to manipulate. This feels like a bull trap.

On the other hand, Google Search Trends showed an uptick for "Bitcoin." With that being said, the markets are extremely jittery overall, and there's nothing bullish about Bitcoin or crypto right now.