BTC Balancing ActOnce again I'm using BTC-e because I use MetaTrader, and the Bitstamp chart throws me off just a wee bit in regards to the immediate future.
Back in March, when we were still coming off the massive bull surge of last year, we still had bubble tendencies, made apparent by the significant and the significant (both notated above). This being a bubble, the volume and price had to be balanced more correctly, as they were going into April. At this point both the and of the Willy became oversold, allowing that powerful line cross in the oversold zone. Also at this point, the negative volume balanced out the positive volume, and the result was the phenomenal price spike and staying power over the next few months.
Still reeling from the bubble, BTC's actual value ever enigmatic, the positive volume and positive price action once again require balance, which occurs in August and September.
Earlier, I posted a chart appealing to the bull side in us, but the strength I really want coming into this may only arise from another wringing of the weak hands. This holds true especially after what many consider to be a dead cat bounce occurring last week. A wringing of the hands could result in a minor flash crash on BTC-e, as the negative volume bar lengthens. This would potentially allow both lines of the Willy to become oversold, and will consequentially allow the all but perfect oversold Willy line cross. This will result in On Balance Volume bouncing off the floor and ascending once more.
I realize this speculation is quite detailed, and risks being complete nonsense because of it's pretense of extreme clarity, but I only include personal exactness for fun. I realize this conflicts with earlier charts in terms of my forecast for the immediate future, but essentially I just want to get across the need for another bear shaking after that "dead cat bounce."
Obviously, this chart does not take into account overall volume balancing, including all the time before March of this year, but there are way too many factors to account for in even attempting to make that information useful. The pattern is consistent enough in today's Bitcoin climate to induce speculation on my part.
Breadth Indicators
DAL Long - Bull Flag ConsolidationThe idea here isn't very difficult to understand. DAL has made a run up from $35.51 on August 8th, where we saw a bounce off the 150EMA, a personal favorite area to get long for me, especially looking at the weekly chart for this. Anyways, from the top down:
1) Bullish RSI Holding 60 Support
2) Established Uptrend - Long Term
3) Bounce off 150 EMA
4) Long $4.46 move straight up through all EMA(8/21/50), through resistance, and consolidating above.
5) Broken Downtrend
6)Weekly Uptrend Is Beautiful - Right At EMAs (8/21)
(My Screen Is Too Small To Pull Up Both Simultaneously)
Cons:
1) MACD Is Positive
2) Momentum Tapering As We Consolidate
I like the chart, and like what I see. I'm getting long here. Possibly with a covered call, but maybe something else. Not sure what other plays are available with such low volatility, but the verticals and diagonals are getting old.
Goldman Sachs Short - Overbought Momentum LossGoldman Sachs is a short to me here on the daily for a quick short. I'll disclose now that on the Weekly chart I am long based on the giant indented head and shoulders and the smaller head and shoulders that makes up the right shoulder. That is in my IRA however, as I do not purchase stock (writing covered calls) in my trading account simply because it ties up too much capital (usually).
The weekly outlook aside, I like what we see for a potential brief pullback here. Working from the top down, RSI is approaching it's previous two time resistance around 74, indicating to me that the stock is overbought. Both of these prior occurrences happened in the current trend.
Secondly, we have a shooting star after a two week up move, now followed by what looks like it will be a Harami. GS does not have a historical pattern of breaking out above the BB, even after a slight contraction in volatility. When it has, it's usually a quick retracement.
The one thing I do not like here is that OBV usually leads price and it has now crossed above it's 21WMA. Last time this happened it led a leg up. This time, however, over 50% of the move has already happened and it's just crossing positive, so perhaps it's not much to worry about.
IV%R is low in GS, at only 12% so that leaves the possibility of selling anything for a credit out of the books. That means I'm looking for a Long Put Spread basically. A diagonal wouldn't do because diagonals usually require some time passage, and this should be quick. Although I may keep an eye on the diagonal just to see how it would pan out. This low volatility market is no fun, and leaves my option strategies severely limited. Hopefully we will find some nice charts with higher volatility sometime tomorrow that we can enter some strangles and naked calls/puts with.
BBY Earnings Play; Unbalanced Iron Condor W/ $0 Upside RiskBestBuy has been consolidating since the beginning of July. Earnings are due tomorrow before the opening, and our IV% is at 56%, so I am looking for a play here to collect a credit.
Historically looking at BBY we can see usually see a slightly bullish move after earnings (EPS, which is usually beating estimates). Because of this, and being at the top of this range with our other indicators showing bullish momentum as indicated on the chart, I want upside protection, while I expect the range in BBY to continue through expiration this Friday.
All that being said, and what is shown on the chart, I am selling for a $0.50-$0.55 credit the 25/29.5/34.5/35 Put/Put/Cal/Call. This means if we break out from here, not only will I likely be putting on another bullish trade to take advantage of the breakout, but I will still have a small (VERY small) profit. That however beats a loss.
Ideally, we would like volatility to collapse and BBY to stay between $29.00 and $34.50, but anything above $29.00 would be acceptable.
Bitcoin Price Fails: Triangles, Andrews' Pitchfork, OBVBitcoin price has fallen through all the triangles drawn on this chart - including the big green symmetrical triangle based on the $339.79 low.
Bitcoin price failed to reach escape velocity after breaking out of Andrews' Pitchfork and could never break above descending blue price trigger line. At this point, there is the possibility that price falls back into the pitchfork, taking price significantly lower.
On Balance Volume (OBV) failed to stay above critical black line. That failure, in concert with triangles breakdown, and failure of price to rise above buy trigger line, foreshadowed lower Bitcoin price.
Bitcoin Technical Breakdown ContinuesBitcoin continues its technical breakdown. On the 1-day chart the 50-day EMA has crossed below the 100-day EMA. You'll also notice Bitcoin price has dropped far below the 200-day EMA as well.
In addition, Bitcoin has fallen below the Keltner Channels, which is something I had mentioned as a possibility in the past.
On Balance Volume (OBV) is at an extremely low level. The last time OBV was at these levels Bitcoin price was closer to $100 than $200.
Expect the pain to continue.
Dow Jones - On-balance volume strategyI have checked and over checked this strategy a few times, so I hope there won't be too many mistakes. As you will see, this is a very simple and effective strategy, which produces signals when used on its own, without adding any other indicator on the chart or using any fundamental factor. All you need is the OBV indicator, candlesticks and support and resistance. This is how it goes :
1 Look for a divergence on OBV. It shouldn't be a divergence when the price goes flat, it should be a divergence formed on two peaks or troughs. Note that only class A and B divergences have been taken into consideration.
2 After spotting a divergence, wait for a bullish or bearish candlestick like : hammer. shooting star, doji, engulfing, piercing line, dark cloud cover, abandoned baby. Candlestick patterns can be considered too : Evening/morning star, island reversal.
3 Look for the first structure support, that is the start of the current rally or the start of the current correction and set a target above or below it by a few points. On that particular target, position should be closed by <=50%, of the entire position.
4 Before getting to the target, after moving in your favor, the stop should be adjusted to breakeven.
5 The remaining of the original position should be closed when the trader sees fit, or till a contrary signal appears. I have not found a proper closing signal yet.
In the period this strategy was tested, it produced 39 signals. That means 3 signals each year.
4 signals were whipsaws, the red lines.
5 signals broke even (if the stop would have been adjusted to breakeven after the trade moved in your favor)
11 signals went to structure support, and made a rebound.
19 signals went a lot below structure support, with some of them even predicting long lasting corrections.
You can see that I'm using the word support, and not resistance. That is because this strategy doesn't really give long signals, most of them are shorting signals. Out of the 39 signals, 9 were long, 30 were short. Out of the 9 long signals, 6 went through the immediate resistance, 2 made it only to the resistance, and one of them failed.
This is a trading strategy that I'm going to use from now on, separately from my usual trading system. I'll be back with more information.
Bitcoin Price and On Balance Volume (OBV)While it is well and good to create charts, monitor indicators and attempt to discern the direction of the Bitcoin price, it is easy to get buried in complexity and blinded by bias. That is why the On Balance Volume (OBV) is so valuable.
You can read more about it by following the link below:
www.investopedia.com
Essentially OBV allows you to eliminate a lot of the noise from day to day volume movement and get a clear idea which direction it is headed in. Price and volume are highly correlated as you can see by looking at the chart.
On the OBV, I have added a horizontal black line where OBV has clearly pivoted recently. OBV isn't going to help much in determining price so much as price momentum. Prices below the horizontal line tend to be lower (but aren't always) than the prices below the line. This is relative. For instance, you shouldn't apply this months back. You use it to look at more recent price action not to compare today to several months ago.
You'll notice that OBV is below the horizontal line and has not moved dramatically lower. This helps explain the recent flat Bitcoin price.
The OBV should also help - in conjunction with other patterns and indicators - when to buy or sell Bitcoin. For instance, it may not be a great time to go long Bitcoin since the direction of price isn't clear. Should the volume continue to decline, then price will likely decline with it.
Bitcoin Price and Volume Trend is Still DownAt this point the Bitcoin price has made a decent recovery from past couple of days where price dropped to the mid-$550's. However, looking at the chart the Bitcoin price and volume trends from June are still down. While the price in relation to the Keltner Channels and moving averages did not behave as I thought, I believe they will still exert influence on the price.
For example, the price could go to the top, or perhaps even above the Keltner Channels - somewhere just North of $620. But, then, around the $630 level it runs into price resistance represented by the green line. A similar picture is painted by On Balance Volume (OBV) which correlates with price uptrends and downtrends. OBV had a nice little uptick, but it is not that far from the resistance represented by the red line.
Not pictured on this chart is the KDJ indicator. Earlier today when the price advanced past $600 the "J" part of the indicator moved above the 100 level. "J" can move above 100 and below 0. This can lead to dramatically higher or lower prices, but it also is a good indication right now of the price becoming overstretched.
There is significant price resistance from $620 all the way up to $680. Weekly technical indicators are bearish, and neither price nor volume have broken through overhead resistance. So, for now, I will sit tight and wait to see what happens.
U.S. Stocks: A Top Could be ImminentMarket Breadth:
52-week new highs:
Stocks that are breaking to new yearly highs, which is another key breadth indicator followed by market technicians, when the number starts to diverge failing to make new highs, while the price index continues to grind higher, this usually indicates the lack of internal strength and concerning.
Stocks above long term average:
Swings from excessive bullish and bearish sentiment have been a good contrarian market indicator for the past years. Every time the indexes of stocks above or below 200-days Average reached an extreme of 90-100 percent a correction in SP500 was close.
Instances where the index started falling, diverging away from the SP500 index (indicating internal strength is weakening) were bearish signals, as at least a hefty correction followed. The chart below Illustrates these divergences, where periods of prolonged divergence followed by a more sever downside move, while minor divergences followed less severe corrections.
Updates on twitter.com
Price & Volume Analysis - using OBV to confirm price action Today's tutorial session was spent examining my volume / money flow tool, the On Balance Volume (OBV) indicator. In this example, notice how price broke initially yet OBV did not. When price broke the uptrend line with a corresponding double top fail on the OBV the short really worked.
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How To Spot a Market PeakHow to spot market peaks using Advance/Decline ratio (ADR)?
First, look for divergence between the market and the indicator. Rising market index accompanied with declining number of advancing stocks means upcoming drop. Second, look for high readings of the ADR. Values above 3.5-4x to be considered as significant.
I've done some back testing, which showed pretty interesting results. Here they are:
o It is most likely to see ADR higher than 3 during first quarter of the year. Usually that is February or March as it happened in 2010, 2012 and as it seems in the current 2014.
o After the peak in ADR with values > 3.5 the bull market continues 40-70 more days before correction occurs (see 2010, 2012).
More on: www.capitalhubs.com
SP500: Approaching Bubble Territory?? Part 5: I am Out of StocksIn my series of posts "SP500 Approaching Bubble Territory' I was discussing my arguments for a major bearish move, and i believe we are very close to my awaited point. I am waiting for final confirmation signal which may occur today or Monday to post my short position. For now, I close any long position and cancel any long outlook.
Market Breadth:
Swings from excessive bullish and bearish sentiment have been a good contrarian market indicator for the past 6 years. Every time the indexes of stocks above or below 200-days Average reached an extreme of 90-100 percent a correction in SP500 was close.
Instances where the index started falling, diverging away from the SP500 index (indicating internal strength is weakening) were bearish signals, as at least a hefty correction followed. The chart below Illustrates these divergences, where periods of prolonged divergence followed by a more sever downside move, while minor divergences followed less severe corrections.
Ben Bernanke Speaks and Emerging Markets Taking a HitSince the crash of 2008 emerging markets have seen enormous amounts of capital inflows. As you can see with volume on this chart money has poored into a very popular Emerging Market ETF, EEM. If you look closely, after significant corrections emerging markets are leading US markets. So look for EEM to push out of this recent correction at a higher rate of return compared to the S&P, DJIA and Nasdaq.
What the chart is telling us with this volume and Fibonacci study, emerging markets have capitulated in the near term. On balance volume OBV is near the 2011 US market/Emerging market bottom. Chaiken Money Flow as well as the Elder Force Index, both volume indicators, are suggesting capitulation as well. If I were to use CMF and EFI, I would wait to see both cross the 0 median line before getting bullish.
Another new indicator is the volume weighted-adjusted moving average VWMA. The Volume Weighted Moving Average is a weighted moving average that uses the volume as the weighting factor, so that higher volume days have more weight. It is a non-cumulative moving average, in that only data within the time period is used in the calculation. When the VWMA is distant from the actual price, it suggest capitulation. On weekly the VWMA is at 42.07 while price barely stands on a recent fib line at 38.61.
Looking at price action we can see we have made higher highs and lower lows since the 2011 drop. With the larger fib line (shown on the thumbnail image, not here} we might want to look at is the .382 retrace at 37.90 for support and 37.21 for further support/possible weekly tweezer bottom in the near term.
