A story of 2 Fractals. Is #Bitcoin doomed to repeat itself? #BTC
In the last couple of days, I have observed a lot of people draw a comparison between Bitcoin's price action and structure in the first half of January and where we are at the moment. Without completely dismissing the possibility of a similar result (i.e. Failure and subsequent dump) I want to draw your attention to 2 very important volume indicators, namely the CMF (Chaikin Money Flow) and the OBV (On Balance Volume).
I drew the lines for January in Red and the current situation in Blue (and Magenta).
Firstly, while many might be familiar with the CMF, the OBV seems to be less prevalent. It is very simple but very powerful. Here is how it is calculated:
When the current close is higher than the previous close:
OBV = Previous OBV + Volume of the closed candle
When the close is lower than the previous close:
OBV = Previous OBV - Volume of the closed Candle
What this conveys is the acceleration of volume in a given direction. So, for example, if the price retraces a decent amount after a good move up, but the OBV doesn't move as much or even moves up, it means that there is not much volume in the down move i.e. very little selling compared to buying. This is a good indication of strength in the uptrend. This is how the OBV is used to spot divergences between what we see in price and what is actually happening in the order books.
Now, back to our current structure. When you compare the current price action and it's corresponding OBV/CMF divergences you can see that although there is some similarity in the price pattern to that in January, but the OBV is showing a comparatively significant divergence in buying behaviour by the bulls.
One other thing to keep in mind is the bearish rising wedge pattern in magenta. I don't think we will see much sideways action left here. A decision will be made.
Again, it is very possible we see a dump in the same manner as January 10th, but to make that decision purely on the shared fractal structures could be a mistake those shorting the market right now.
I drew the lines for January in Red and the current situation in Blue (and Magenta).
Firstly, while many might be familiar with the CMF, the OBV seems to be less prevalent. It is very simple but very powerful. Here is how it is calculated:
When the current close is higher than the previous close:
OBV = Previous OBV + Volume of the closed candle
When the close is lower than the previous close:
OBV = Previous OBV - Volume of the closed Candle
What this conveys is the acceleration of volume in a given direction. So, for example, if the price retraces a decent amount after a good move up, but the OBV doesn't move as much or even moves up, it means that there is not much volume in the down move i.e. very little selling compared to buying. This is a good indication of strength in the uptrend. This is how the OBV is used to spot divergences between what we see in price and what is actually happening in the order books.
Now, back to our current structure. When you compare the current price action and it's corresponding OBV/CMF divergences you can see that although there is some similarity in the price pattern to that in January, but the OBV is showing a comparatively significant divergence in buying behaviour by the bulls.
One other thing to keep in mind is the bearish rising wedge pattern in magenta. I don't think we will see much sideways action left here. A decision will be made.
Again, it is very possible we see a dump in the same manner as January 10th, but to make that decision purely on the shared fractal structures could be a mistake those shorting the market right now.
Trade closed manually:
Boom! Scaled out my long between 4500-5000. Double my margin account, not bad for a Tuesday ;)