Up or Down Ser?
001 - An Ichimoku analysis of the Bitcoin Market - 1st February 2022
Weekly
Let’s start off with some high timeframe context. The market has been ranging between 29 and 69K for what’s soon to be a year now. This HTF range can be divided into two distinct ranges, with an ‘airpocket’ between them due to the lack of price action between in this zone.
Furthermore, assuming that we have printed a local low (recent PA suggests this is the case), this higher low, combined with the marginally higher high at 69K, indicates that from a technical point of view we remain in an uptrend (albeit one with less momentum than a UN security council resolution).
This lack of momentum/direction causes price to chop up and down within the two subranges. Once a sufficient impetus comes about, this will leap across the chasm to the opposing range.
One point to note, is the way the previous bottom printed several pinbar-style demand bars to form a clearly defined bottom. So far, we haven’t printed a clear bottom, and, as bottoms tend to be a process rather than an event (like tops), I’m approaching this with a degree of suspicion.
Ok, enough preamble.. Wer cloud ser?
The weekly cloud indicates flat, momentum-less price action, with both cloud spans being more or less flat and parallel to each other. The lagging span (the least important of the cloud’s elements) is about to enter price, suggestive of increasing overhead resistance.
Price is currently sitting inside the cloud, this is considered to be a neutral/no-trade zone. To the bulls credit, they printed a bullish pinbar, rejecting price from below the cloud. I would expect the top cloud span to be tested in the coming weeks, however should we begin to close weekly’s below the cloud, then it’s Game Over for bulls.
Another slightly concerning factor is the way the TK lines (red and blue) are curling in towards each other. Bulls DO NOT want these to cross here or Insilico (my favourite bear) will become insufferable.
Daily
The daily cloud shows a clearly defined downtrend, with a sequence of lower highs and lower lows. Anyone who looks at this chart and declares that they’re bullish is either coping, high, a moron, or most likely all three.
Let’s start with the bad news prior to moving on to the hopium.
The cloud is in a full bearish configuration, with price under the cloud, indicating a bearish trend, whilst the TK lines are also crossed bearishly. The cloud is red, suggesting that future direction is more likely to be southwards than vice versa, whilst the lagging span is below price.
We have attempted to break up past the Kijun (weak resistance), however have been rejected each time without even making it to the trendline. So far, the bulls have been leaving their balls at home.
Some hopium plz ser? For mi famailia!
Some early signs of a mean-reversion/possible reversal are visible on the chart. The first being the overextended nature of price action. This can be thought of as an elastic band oscillating around a central point (the mean). Every now and again this gets over extended and ‘snaps’ back towards the mean.
Mean reversion
The price has been in a sustained downtrend for a long while now and is significantly overextended to the downside. It is reasonable to expect some form of mean reversion to take place. In this context, the flat cloud span B (red) acts as the mid-point at 51Kish. It is reasonable for this area to be tested in the medium term. The reaction to this level will dictate whether we’re back to Up Only PA, or if Peter Shiff will be dancing on our graves.
C-Clamp
An extension of the above, a C-clamp is when the TK lines diverge too far away from each other. This isn’t a signal in itself (and has bitten me in the backside in the past). However as one can clearly see, these two lines don’t like to be apart for long.
Thickening, flat cloud
The thickening cloud (as span B remains flat, whilst span A melts downwards), tells us that downwards momentum is slowing. This also increases the RR of a potential edge to edge trade, should we close within the cloud.
Local Uptrend
Price is in a distinct minor uptrend, so it is reasonable to assume that it’ll break past the Tenkan in the coming days. The reaction at the trendline will inform us whether we’re going to make a run for the Kijun (red line), or have another sweep of the lows.
So Ser Long or Short?
Depending on your risk tolerance, these are some potential setups, ranging from Ballsy to Conservative.
Buy on close above trendline. Invalidation being a close back below TL
Buy on close inside the cloud. Invalidation being a close back below the cloud
Buy on close above the cloud (this is the textbook Ichimoku setup). Invalidation being a close inside the cloud.
Best of luck, and Godspeed.
TCP
Thanks, bud. I don't actually trade, but I follow closely traders I respect so as to know whether I should hold off, or stack more. George the artist.