BTCUSD 1h - Heikin Ashi, Bollinger Bands, custom OBVOSC & MACD
This is a 1HR BTCUSD chart (BitFinex) using Heikin Ashi candlesticks, Bollinger Bands, EMA (9, 15, 21, 55), a custom OBVOSC indicator and a standard MACD - 5 days of price action review.
Heikin Ashi is another Japanese candlestick pattern and HA actually means ‘average’ in Japanese. It does just that, averaging out price movements using a weighted calculation I won’t cover here (refer to Investopedia - investopedia.com/trading/heikin-ashi-better-candlestick/ ). Essentially, what you need to understand is that it smoothes out price action by reducing noise and making key trends easier to identify. This is great for trend traders, not so great for day traders that rely on volatility and short term price action.
Over the five days, from the 2nd of January until the 7th of January, we saw prices continue to oscillate in a tight range from 3800- 4100 with little price action. The tightening and sideways action is typical of a market in indecision. Finally on the 6th of January Bitcoin broke out rising $300 within 5-15 minutes, apparently due to a massive whale buy order via BitStamp in Europe. Typically long upper shadows were achieved for only a few hours, with a price retracement showing weak support.
Bollinger Bands , the three blue bands that ‘wrap’ around the BTC price, were developed by a guy called Bollinger. The top and bottom blue lines are simple 2 SMA away from the current price, while the line in the centre is the average of the two. The great things about this indicator is that we know, 90% of the price action will occur within these bands. And generally, if the price is at the top/bottom 20% of a band we are likely to see some price action towards the middle of that band in the near future. This is based on the simple concept that price’s oscillate around an equilibrium.
Since the bullish price action on the 28th, the BB have remained fairly tight ranging from 100 - 300 USD. The upper line of the BB has been pierced on only 11 times until the breakthrough on the 6th, with 4 large consecutive bullish candle bodies outside the BB. The BB have blown out to 3800 to 4300 now but are quickly contracting as price action consolidates at the next level of S&R at 4100. One long lower shadow nearly pierced the lower BB already, as the level of S&R is likely to broken, expect future price action to touch on lower BB soon.
Volume is one of the most reliable indicators but it is important that you understand how much wash trading is happening on most exchanges and choose to trade only on reliable exchanges (read this for more information). We saw a bearish volume from the 3rd to the 6th of January remain low and flat. On the 6th, a relatively small whale purchase resulted in a pump in the BTC price, which demonstrates the lack of liquidity in the market. Can think it kind of odd that a whale purchase 10 million in BTC in 5-10 minutes, why not layer those purchases in and get them at a lower price?? Remember that weak volume goes hand in hand with weak trending (price consolidation and sideways action). The volume quickly dropped after the 1 hour pump, with a large red candle on the 12th hour. IMHO Volume this low tends to indicate that it can’t be long and it the breakout could be bearish.
The OBVOSC is a custom indicator by Lazy Bear (you can get it here for tradingview - tradingview.com/script/Ox9gyUFA-Indicator-OBV-Oscillator/). It is an OBV ( On Balance Volume ) with an oscillator built into it. OBV is a momentum indicator that is running total of volume (both sell and buy volume). The assumption is that significant volume flow will often foreshadow a price change, which presents a trading opportunity.
The OBVOSC on the 1HR is set on 9 hr so the indicator is quite sensitive and there is little lag between price action seen via candlesticks and the indicator. Therefore this indicator is good for identifying entry and exit areas that I can use for longer term trend trading. The market is primarily sideways with little volume volatility so it is not providing an clear entry/exit signals until the short bump in volume on the 6th. It clearly show the drop in volume after the bump, indicatingt to me a lack of follow through and volume support. As you can note, there are several false signals given out on a shorter time frame then the daily, therefore this indicator should be looked on the daily and then the hourly for a better perspective.
The MACD (Moving Averages Convergence Divergence) indicator is a popular trend momentum indicator that can show us a security's overall trend. The core assumption of this indicator is that a security’s price oscillates around an equilibrium. Therefore by looking at the relationship between different MA calculations, we can identify what specific stage a security maybe of it oscillation cycle. This is why we have two lines, the first is called the MACD (26 - 12 hour MA) and the second is called a Signal line (9 hour MA). We also have a Histogram (MACD-Signal Line), which is the 1st thing I look at. Finally there is the Zero line, which is basically when the 26 and the 12 hour are equal. The MACD , that combines several indicators, is worth watching when one or more of the following happens: crossovers (MACD/Signal/Histogram and Zero line), convergences/divergences between price and rapid changes. Learn more about this at Investopedia.
The first thing I look at is the Histogram as it is visually clear and it most often precedes MACD/Signal crossovers. The histogram oscillated around the zero line throughout the week until the 6th with 15 to -15. Again, on the 6th it bump to 30 (which is still not very significant) and an immediate decline in volume. The MACD crossed the Signal line several times without significant strength which tells me to avoid even short term trading on most of the oscillations except for the 3rd and the 6th. I think it is probably safer to wait for a pump, like on the 6th, and the short the security after a few hours of confluence.
Overall the tight time range continued over the period until a final breakout on the upside, which was a surprise personally. Follow through support looks weak, so I expect that if this price will not hold for long and could lead to a capitulation to the mid 3000s in the next week.
Heikin Ashi is another Japanese candlestick pattern and HA actually means ‘average’ in Japanese. It does just that, averaging out price movements using a weighted calculation I won’t cover here (refer to Investopedia - investopedia.com/trading/heikin-ashi-better-candlestick/ ). Essentially, what you need to understand is that it smoothes out price action by reducing noise and making key trends easier to identify. This is great for trend traders, not so great for day traders that rely on volatility and short term price action.
Over the five days, from the 2nd of January until the 7th of January, we saw prices continue to oscillate in a tight range from 3800- 4100 with little price action. The tightening and sideways action is typical of a market in indecision. Finally on the 6th of January Bitcoin broke out rising $300 within 5-15 minutes, apparently due to a massive whale buy order via BitStamp in Europe. Typically long upper shadows were achieved for only a few hours, with a price retracement showing weak support.
Bollinger Bands , the three blue bands that ‘wrap’ around the BTC price, were developed by a guy called Bollinger. The top and bottom blue lines are simple 2 SMA away from the current price, while the line in the centre is the average of the two. The great things about this indicator is that we know, 90% of the price action will occur within these bands. And generally, if the price is at the top/bottom 20% of a band we are likely to see some price action towards the middle of that band in the near future. This is based on the simple concept that price’s oscillate around an equilibrium.
Since the bullish price action on the 28th, the BB have remained fairly tight ranging from 100 - 300 USD. The upper line of the BB has been pierced on only 11 times until the breakthrough on the 6th, with 4 large consecutive bullish candle bodies outside the BB. The BB have blown out to 3800 to 4300 now but are quickly contracting as price action consolidates at the next level of S&R at 4100. One long lower shadow nearly pierced the lower BB already, as the level of S&R is likely to broken, expect future price action to touch on lower BB soon.
Volume is one of the most reliable indicators but it is important that you understand how much wash trading is happening on most exchanges and choose to trade only on reliable exchanges (read this for more information). We saw a bearish volume from the 3rd to the 6th of January remain low and flat. On the 6th, a relatively small whale purchase resulted in a pump in the BTC price, which demonstrates the lack of liquidity in the market. Can think it kind of odd that a whale purchase 10 million in BTC in 5-10 minutes, why not layer those purchases in and get them at a lower price?? Remember that weak volume goes hand in hand with weak trending (price consolidation and sideways action). The volume quickly dropped after the 1 hour pump, with a large red candle on the 12th hour. IMHO Volume this low tends to indicate that it can’t be long and it the breakout could be bearish.
The OBVOSC is a custom indicator by Lazy Bear (you can get it here for tradingview - tradingview.com/script/Ox9gyUFA-Indicator-OBV-Oscillator/). It is an OBV ( On Balance Volume ) with an oscillator built into it. OBV is a momentum indicator that is running total of volume (both sell and buy volume). The assumption is that significant volume flow will often foreshadow a price change, which presents a trading opportunity.
The OBVOSC on the 1HR is set on 9 hr so the indicator is quite sensitive and there is little lag between price action seen via candlesticks and the indicator. Therefore this indicator is good for identifying entry and exit areas that I can use for longer term trend trading. The market is primarily sideways with little volume volatility so it is not providing an clear entry/exit signals until the short bump in volume on the 6th. It clearly show the drop in volume after the bump, indicatingt to me a lack of follow through and volume support. As you can note, there are several false signals given out on a shorter time frame then the daily, therefore this indicator should be looked on the daily and then the hourly for a better perspective.
The MACD (Moving Averages Convergence Divergence) indicator is a popular trend momentum indicator that can show us a security's overall trend. The core assumption of this indicator is that a security’s price oscillates around an equilibrium. Therefore by looking at the relationship between different MA calculations, we can identify what specific stage a security maybe of it oscillation cycle. This is why we have two lines, the first is called the MACD (26 - 12 hour MA) and the second is called a Signal line (9 hour MA). We also have a Histogram (MACD-Signal Line), which is the 1st thing I look at. Finally there is the Zero line, which is basically when the 26 and the 12 hour are equal. The MACD , that combines several indicators, is worth watching when one or more of the following happens: crossovers (MACD/Signal/Histogram and Zero line), convergences/divergences between price and rapid changes. Learn more about this at Investopedia.
The first thing I look at is the Histogram as it is visually clear and it most often precedes MACD/Signal crossovers. The histogram oscillated around the zero line throughout the week until the 6th with 15 to -15. Again, on the 6th it bump to 30 (which is still not very significant) and an immediate decline in volume. The MACD crossed the Signal line several times without significant strength which tells me to avoid even short term trading on most of the oscillations except for the 3rd and the 6th. I think it is probably safer to wait for a pump, like on the 6th, and the short the security after a few hours of confluence.
Overall the tight time range continued over the period until a final breakout on the upside, which was a surprise personally. Follow through support looks weak, so I expect that if this price will not hold for long and could lead to a capitulation to the mid 3000s in the next week.
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