Good morning, traders. Everyone is freaking out because of last night's drop, but in the grand scheme of things it was only about 4%. So why the fuss? Because traders are scared that price will go down and remain down. However, if you are a trader then whether price is going up or down should make no difference, only that it's moving so that you can profit. If you are an investor, then your TF is necessarily much longer, so the drop shouldn't have been of any concern to you either, nor whether or not price drops below $4000 and remains there for 6 months. But most people in the crypto market have not taken the time to define who they are as a trader or investor, nor have they learned how and why markets move like the do, and, therefore, become emotional when price moves. I am extremely proud of the individuals in our Discord trade and research group as they showed complete calmness during last night's price drop event. This morning now shows well-oversold 4H RSI which means that sooner, rather than later, we should see a move up. That doesn't mean price can't drop a bit further first, only that ultimately we should expect a nice move upward.
It's important to understand that last night's event was manufactured to elicit a response. It wasn't something that just happened randomly. If you watched the orderbook on the exchange, or at least on TensorCharts.com, then you saw heavy sell pressure appear and continue moving down with price as support was pulled. This caused the herd to sell and/or get liquidated as price dropped. However, for every sell there must be a buy, which means someone's longs were getting filled on the way down. If those longs belonged to C.O., then you should expect price to move up overall. That doesn't mean it must move up right this minute. Novice traders tend to think that there must be a strong rebound after a shakeout. But that isn't always the case. Many times we see price gradually work its way back up and out. That does not signal low-quality demand as many big talkers in CT are stating.
Once again, I am providing Bitfinex and Bitstamp charts as they show the two general price levels being found in the market. Bitfinex retains a $100 premium. We can see that the Bitstamp chart shows a pennant forming along the S3 pivot which means we should expect a break to the upside to the $6390/$6400 level which was the bottom of the previous TR, and is denoted by the horizontal blue line, as well as the S1 pivot on this TF. What we want to see is OBV breaching its descending resistance line as price moves up. This will signal that the move up is true.
I have labeled a mini-accumulation on the Bitfinex chart. A gap remains at $6359.50 on Bitfinex which will most likely be filled. If so, then price will be moving out of the TR of this mini-accumulation and we can expect it to go into markup which means that it should continue upward. The bottom of the previous TR spoken about in the Bitstamp chart is labeled at $6526 on Bitfinex, so that would be the expected target area for now. There is also a gap at $6527.74 on Bitstamp that will likely be filled which would put price above the pivot on the 15 minute TF on Bitfinex which would be a bullish signal on this short TF.
When looking at volume and price action, we can note that the drop on the 4H Bitfinex chart was similar to the drop on September 5th in, both, size and volume. In other words, nothing significantly note-worthy. However, if we zoom in to the 15 minute TF, it tells another story. We can clearly see two larger volume spikes with the first drop of $220 being the smaller of the two. The second drop of $115 had heavier volume. The second 15 minute candle took more effort for significantly less result. This tells us that absorption was happening in that $6250-$6350 range.
Returning to September 5th, we can see the two largest candles printed the opposite result. The first was a drop of $130 and the second was $345 with the volume being greater on the second candle than the first. Because of this, we can see price dropping further just a few days later, rather than increasing. Finally, we can also see that this recent large 15 minute volume candle was less than the September 19th candle which was buy volume. Put another way, the strongest volume recently has come on the buyside, not sellside, even taking into consideration last night's candle. Furthermore, the volume on the September 5th candle, which was more than the September 19th candle, is less than the previous buy volume on the August 21st candle. As a matter of fact, the largest volume 15 minute candles overall since June have been buyside candles and they have been attached to large upward movements. Volume cannot be understood in a vacuum. It must have context which means it is always relative. So, while there are no guarantees about price direction, if you are dogmatically holding onto the belief that price MUST drop below $4000, then you are not paying attention to what is being said on the chart. Can we drop that far? Sure we can and it is a possibility I have discussed multiple times this year, but this dogmatic belief that it absolutely must do so is pure emotion.
In the broader financial world, yesterday's route of the U.S. stock markets sent expected reverberations throughout Asia as stock markets in the east also saw sharp sell-offs. As I have mentioned numerous times before, the cryptocurrency market is extremely risky and during times of market sell-offs we can likely expect to see the same thing happening in the crypto market as fiat heads for safety. This does not mean money will leave the crypto market and stay out of it, only that sudden sell-offs cause knee-jerk reactions resulting in movements toward safety. Gold, as a result, is sharply higher this morning as expected. In terms of the USD, after a strong drubbing recently during which we were long EUR against the USD, long GBP against the USD, and short USD against the JPY, the expected bounce is currently happening and we are now long USD against the JPY for just a bit.
It's important to understand that last night's event was manufactured to elicit a response. It wasn't something that just happened randomly. If you watched the orderbook on the exchange, or at least on TensorCharts.com, then you saw heavy sell pressure appear and continue moving down with price as support was pulled. This caused the herd to sell and/or get liquidated as price dropped. However, for every sell there must be a buy, which means someone's longs were getting filled on the way down. If those longs belonged to C.O., then you should expect price to move up overall. That doesn't mean it must move up right this minute. Novice traders tend to think that there must be a strong rebound after a shakeout. But that isn't always the case. Many times we see price gradually work its way back up and out. That does not signal low-quality demand as many big talkers in CT are stating.
Once again, I am providing Bitfinex and Bitstamp charts as they show the two general price levels being found in the market. Bitfinex retains a $100 premium. We can see that the Bitstamp chart shows a pennant forming along the S3 pivot which means we should expect a break to the upside to the $6390/$6400 level which was the bottom of the previous TR, and is denoted by the horizontal blue line, as well as the S1 pivot on this TF. What we want to see is OBV breaching its descending resistance line as price moves up. This will signal that the move up is true.
I have labeled a mini-accumulation on the Bitfinex chart. A gap remains at $6359.50 on Bitfinex which will most likely be filled. If so, then price will be moving out of the TR of this mini-accumulation and we can expect it to go into markup which means that it should continue upward. The bottom of the previous TR spoken about in the Bitstamp chart is labeled at $6526 on Bitfinex, so that would be the expected target area for now. There is also a gap at $6527.74 on Bitstamp that will likely be filled which would put price above the pivot on the 15 minute TF on Bitfinex which would be a bullish signal on this short TF.
When looking at volume and price action, we can note that the drop on the 4H Bitfinex chart was similar to the drop on September 5th in, both, size and volume. In other words, nothing significantly note-worthy. However, if we zoom in to the 15 minute TF, it tells another story. We can clearly see two larger volume spikes with the first drop of $220 being the smaller of the two. The second drop of $115 had heavier volume. The second 15 minute candle took more effort for significantly less result. This tells us that absorption was happening in that $6250-$6350 range.
Returning to September 5th, we can see the two largest candles printed the opposite result. The first was a drop of $130 and the second was $345 with the volume being greater on the second candle than the first. Because of this, we can see price dropping further just a few days later, rather than increasing. Finally, we can also see that this recent large 15 minute volume candle was less than the September 19th candle which was buy volume. Put another way, the strongest volume recently has come on the buyside, not sellside, even taking into consideration last night's candle. Furthermore, the volume on the September 5th candle, which was more than the September 19th candle, is less than the previous buy volume on the August 21st candle. As a matter of fact, the largest volume 15 minute candles overall since June have been buyside candles and they have been attached to large upward movements. Volume cannot be understood in a vacuum. It must have context which means it is always relative. So, while there are no guarantees about price direction, if you are dogmatically holding onto the belief that price MUST drop below $4000, then you are not paying attention to what is being said on the chart. Can we drop that far? Sure we can and it is a possibility I have discussed multiple times this year, but this dogmatic belief that it absolutely must do so is pure emotion.
In the broader financial world, yesterday's route of the U.S. stock markets sent expected reverberations throughout Asia as stock markets in the east also saw sharp sell-offs. As I have mentioned numerous times before, the cryptocurrency market is extremely risky and during times of market sell-offs we can likely expect to see the same thing happening in the crypto market as fiat heads for safety. This does not mean money will leave the crypto market and stay out of it, only that sudden sell-offs cause knee-jerk reactions resulting in movements toward safety. Gold, as a result, is sharply higher this morning as expected. In terms of the USD, after a strong drubbing recently during which we were long EUR against the USD, long GBP against the USD, and short USD against the JPY, the expected bounce is currently happening and we are now long USD against the JPY for just a bit.