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This is the third straight time that this has happened, leading me to believe that there’s a potential for a triple-bottom pattern to reveal itself.
What is the Triple-Bottom Pattern?
Below are some useful rules to follow when it comes to determining if something fits the qualifications of a triple-bottom pattern.
What’s notable, according to the same source as the pictures posted above,
“As the Triple Bottom Reversal develops, it can start to resemble a number of patterns. Before the third low forms, the pattern may look like a Double Bottom Reversal. Three equal lows can also be found in a descending triangle or rectangle. Of these patterns mentioned, only the descending triangle has bearish overtones; the other sare neutral until a breakout occurs. Similarly, the Triple Bottom Reversal should also be treated as a neutral pattern until a breakout occurs. The ability to hold support is bullish, but demand has not won the battle until resistance is broken. Volume on the last advance can sometimes yield a clue. If there is a sharp increase in volume and momentum, then the chances of a breakout increase.”
Here’s another example chart from the same source:
The situation above looks very similar to what we’re seeing now on the charts. Let’s pull up that bitcoin chart that was posted at the beginning of the chart one more time:
It’s a bit hard to see what’s going on, so let’s scroll out a bit to get a better idea of what’s going on.
As noted in the examples/information posted above from stockcharts.com , the target for the confirmation of this pattern would be $7.4k (approximately) with volume upon the breakout.
As usual, here are two of my favorite indicators on this short-term scalping chart — the EMA 10 and EMA 20, which are the white and blue lines, respectively.
Here’s the rate of change for both of those indicators. Currently, there’s no discernible difference between the rates of both.
However, it’s been observed that when the rate of change for these two lines converge in this way, there’s usually a crossover and the line that was underneath (in this case the EMA10), ends up coming over top.
That would be a solid bullish sign for another little rally.
These momentum indicators all showed serious divergence at almost the same time (Stoch RSI, Williams %R with HMA smoothing, CCI, and RSI).
It’s worth stating that there are more uses for the EMA than simply looking for buy/sell signals with crosses.
As explained prior, whenever price falls below that of an MA indicator, that MA indicator becomes a resistance. When it rises above, the indicator becomes a firm support.
Now, it isn’t a given that bitcoin breaks through, but when we have oversold indicators on almost every time frame and there’s divergence that was detected on nearly each, followed by some green candles (Heikin Ashi), these are signals that we must take seriously as traders.
The EMA-20 is standing at 6.9k currently, which makes sense because $6.9k-7.1k has been standing as a firm resistance at this point.
Another Point to Point Out:
The rate of change (above) for these EMA indicators show that they’re in the negative currently. So, their values are decreasing.
If we do the math on that, if the price increases while the value of the EMA indicators decrease, then we can reasonably expect that the price crossing over the EMA indicator will happen sooner or later.
Remember These Are Scalping Strategies Only*
See that weird yellow line in the chart above? That’s the accumulation/distribution line.
For those that are unfamiliar with this indicator there are just two things you need to know to understand how it works:
1) When the line goes up, that means ‘accumulation’ is going up or buy pressure.
2) When the line goes down, that means ‘distribution’ or selling pressure has increased.
For some reason, this isn’t an often used indicator, but it can be yet another indicator that lets us know when there’s going to be a reversal in the price if we can see any divergence (i.e., accumulation going up while price is going downward — bullish signal).
The Ichimoku is yet another lagging indicator, but it has value in this analysis because the clouds that it produces help us to get a better understanding of where potential resistance points are and the color of the cloud can give us some indicators as to whether bitcoin is over-performing or under-performing expectations.
There are a few things that should be noted with what is being produced by this indicator here:
The two lines that you see in the picture above are the conversion (blue line) and base line (red line). They operate on principles that are identical to MA indicators, because they are MA ( with a different formula for smoothing them out — but we won’t get into that right now).
As you can see, the conversion line is hovering right around where the EMA-10 was. If the price can surpass the conversion line, that will once again be a solid bullish signal that we can work off of and use to predict whether the price run-up will continue.
Technically, if you’re counting the wick on that most recent candle that formed on the 2H chart, then this point has already been surpassed.
That portion I circled above is the ‘cloud’ part of the Ichimoku that you’ve probably heard a lot about.
As you expected:
Green = bullish
As expected, the cloud is green (it’s a lagging indicator — so it’s looking backwards). This means that bullish activity is expected. Given the fact that the price is underneath the cloud, the Ichimoku indicates that the price is underperforming expectations.
Before, it was overperforming expectations.
Low volume once again.
If this doesn’t break, then it’s back to $6.5–6.6k for Bitcoin. That’s why I said, you can either hedge your position both ways with a short+long at this very point — or you could wait until it breaks $6.9k/$7k.
Or you could go long here and put in a stop-loss at $6.6k.
There doesn’t seem to be any strong moves in either direction that are worth noting — but the drop of 10%+.