3 Bullish Divergences
Hello everyone. Today we'll be looking at three key bullish divergences on the daily chart, and briefly mentioning the fear and greed index (created by alternative.me) in order to justify a long position on BTC.
Since the major correction, bitcoin has been trading in a pennant formation which recently broke down. Within this pattern, we can notice that the candles have been making lower lows and lower highs over time. However, at the same time, the RSI, CCI (consumer commodity index), and MACD have been making higher lows as well. In fact, as of today, you can notice that the CCI has gone from negative to positive, which is a significant bullish indicator. This signifies that the current downtrend is weakening significantly, which is corroborated by the consistently lower trading volume. What this tells us overall is that the panic selling is over; there is lethargy in the markets in either direction. Bulls and bears seem hesitant to enter and exit the market. Generally, this hints at a reversal of the current corrective trend.
This is also corroborated with the fear and greed index. This value indexes search engine trends for key words, as well as other sources such as media mentions, in order to gauge how much fear or greed there is in the BTC market. This is a contrarian indicator; high values close to 100 that signify greed are bearish values, low values close to 0 that signify fear are bullish values. In the last month, this index has been sitting squarely in the "extreme fear" category, between 10 and 25. We can thus draw the conclusion that most of the bears and panic sellers have already exited the market.
Furthermore, we can pull from a key prediction from trader Alessio Rastani and his LeadingTrader video series. Alessio claimed last week that in order for the correction to wrap up and the last of the bulls to be shaken out of the market, BTC needs to retest the local low of 30k-31k and bounce off this level significantly. In the following few days, BTC indeed went down to 31k and bounced off to 37k (is this a strong enough bounce? I'm not sure). Based off of Alessio's prediction, BTC price action is behaving sufficiently to set us up for an end of the corrective trend in the near future.
Since the major correction, bitcoin has been trading in a pennant formation which recently broke down. Within this pattern, we can notice that the candles have been making lower lows and lower highs over time. However, at the same time, the RSI, CCI (consumer commodity index), and MACD have been making higher lows as well. In fact, as of today, you can notice that the CCI has gone from negative to positive, which is a significant bullish indicator. This signifies that the current downtrend is weakening significantly, which is corroborated by the consistently lower trading volume. What this tells us overall is that the panic selling is over; there is lethargy in the markets in either direction. Bulls and bears seem hesitant to enter and exit the market. Generally, this hints at a reversal of the current corrective trend.
This is also corroborated with the fear and greed index. This value indexes search engine trends for key words, as well as other sources such as media mentions, in order to gauge how much fear or greed there is in the BTC market. This is a contrarian indicator; high values close to 100 that signify greed are bearish values, low values close to 0 that signify fear are bullish values. In the last month, this index has been sitting squarely in the "extreme fear" category, between 10 and 25. We can thus draw the conclusion that most of the bears and panic sellers have already exited the market.
Furthermore, we can pull from a key prediction from trader Alessio Rastani and his LeadingTrader video series. Alessio claimed last week that in order for the correction to wrap up and the last of the bulls to be shaken out of the market, BTC needs to retest the local low of 30k-31k and bounce off this level significantly. In the following few days, BTC indeed went down to 31k and bounced off to 37k (is this a strong enough bounce? I'm not sure). Based off of Alessio's prediction, BTC price action is behaving sufficiently to set us up for an end of the corrective trend in the near future.
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