CarbiArbittrage
Short

BTC 12 Hr - Heikin Ashi, MA, BB, RSI +

GEMINI:BTCUSD   Bitcoin / U.S. Dollar
Overall Summary:

Overall the last 7 days ( 9th - 16th of January, 2018) were bearish and I am bearish for the next 7 days.

Bitcoin is trading in the $4000 to $3500 range during the last week, 81.7% down from the ATHs, with a market cap of $63 billion. The chart indicates a continuation of the current down trend. The price is closest to the 100 MA with a trend towards the 100 MA. The volume has decreased over the last week, which is supporting the current price action. The RSI consolidated in convergence with the recent price action, a bearish signal. Finally the MACD decreased in convergence with the recent price action, but with some divergence in the last few days, overall a bearish signal.

Detailed Summary:

This chart uses 12 hour Heikin Ashi Candlesticks with a custom trend bar indicator, Bollinger Bands , 4 MAs (20, 50, 100 & 200), RSI & MACD .

Heikin Ashi candlesticks are great for trend and swing trading. Heikin Ashi means ‘average’ in Japanese because these candlesticks ‘average out’ price action vs traditional candlesticks that are based on OHLC (Open High Low Close). By averaging out price action this candlestick style reduces ‘noise’ and generates a much smoother chart pattern. This is helpful for trend traders as it is easier to identify the key trend in the market and to ignore smaller price volatility .

During the last week the price has ranged by $500, opening at $4000 and closing at $3600. The price has decreased over the period which is a continuation of the long term price trend.

Moving Average are also used on this chart to help identify major areas of S&R and general price trend action. I prefer to use simple Moving Averages on the 12 hour time frame. The 200 MA is red, the 100 MA is orange, the 50 MA is yellow and the 20 MA is green. The choice of colours helps me to read the chart and see if price action is bullish or bearish . For example, if the red is on top and the green is on the bottom, it is clearly bullish . It is also important to note that the longer the Moving Average period, the stronger the support and resistance .

During the last week the price is closest to the 100 Moving Average and during this period it has trended towards/around the 100 Moving Average. The 100 Moving Average is currently acting as resistance while no Moving Average is acting as support. The key Support area is $3300 and key Resistance areas is $3600. I forecast in the next week that price will test the next support area .

Bollinger Bands are the two blue bands that ‘wrap’ around the security’s price. The top and bottom are two standard deviations away from the Moving Average. If the market becomes more volatile, the bands widen and vice versa. Historically 90% of the price action occurs with the Bollinger Bands , as the price oscillates around an equilibrium. There it helps us identify where the price is in the oscillating cycle so that we can identify entry/exit points and major price changes (on the 10% chance when price breaks through the Bolling Bands).

During the last week the Bollinger Bands have expanded from $450 to $700. The increase in the Bollinger Bands width was due to increased price volatility during the last week. The wicks broke through the upper band on 0 half days, lower band on 3 half days and stayed within the bands on 12 half days. I forecast in the next week that the Bollinger Bands will consolidate and overall trend is bearish .

Volume is a key indicator that I use to understand past, current and possibly future price action. Unfortunately a majority of the exchange volume is fake ‘wash’ trading so it is important to rely on data from reliable exchanges like Binance and BitFinex. Volume that supports price recent action helps strengthen my belief in a specific trend.

During this period volume has decreased in convergence with the recent price action. On a longer term time frame, the volume is in convergence with the long term trends. I forecast in the next week that the volume will decrease and this will support a decrease of price.

The RSI is a popular momentum based oscillator that helps us identify what stage in the security’s oscillation cycle it is most likely at. So after identifying the key market trend we can then apply the RSI to forecast future moves in price action (in terms of velocity and magnitude). This indicator is useful determining entry and exit points, for trend traders like myself, it is used on longer time frames as it is much more reliable. Most of the significant price action occurs around the 30 and 70 areas and ideally what we are looking for is divergence between the price action and the RSI .

During the period the RSI consolidated to 38 and it is in convergence with the recent price action. It is demonstrating a bullish failure swing is when: RSI drops below 30 (considered oversold), then RSI bounces back above 30, then RSI pulls back but it is currently above 30 (remains above oversold). I am watching to see if it bounces above 30 strongly, a bullish sign. Otherwise if it drops below 30 I expect more bearish price pressure. I forecast in the next week that the RSI will decrease over the next week and this indicates a decrease of price.

The MACD is a popular trend following momentum indicator that can help identify a security’s momentum, trend direction and duration. is a popular trend momentum indicator that can show us a security's overall trend. The core assumption of this indicator is that a security’s price oscillates around an equilibrium. Therefore by looking at the relationship between different MA calculations, we can identify what specific stage a security maybe of it oscillation cycle. This is why we have two lines, the first is called the MACD (26 - 12 MA) and the second is called a Signal line (9 MA). We also have a Histogram (MACD-Signal Line), which is the 1st thing I look at. Finally there is the Zero line, which is basically when the 26 and the 12 MA are equal. The MACD , that combines several indicators, is worth watching when one or more of the following happens: crossovers (MACD/Signal/Histogram and Zero line), convergences/divergences between price and rapid changes.

During this period the MACD has decreased in convergence with the recent price action but since the 14th it has started to increase in divergence with the recent price action. in the last . The MACD line crossed below the Signal line which was a bearish trend in convergence with the price action on the 10th. The MACD line crossed below the Zero line which was a bearish trend in convergence with the price action on the 11th. The histogram crossed below the Zero line which was a bearish trend in convergence with the price action. I forecast in the next week that the MACD will consolidate and then increase over the next week and this indicates decrease and then consolidation of price.

References:
Heikin Ashi summary - https://www.investopedia.com/trading/hei...
Moving Average summary - https://www.investopedia.com/terms/m/mov...
Support and Resistance summary - https://www.investopedia.com/trading/sup...
Bollinger Bands summary - https://www.investopedia.com/terms/b/bol...
Fake exchange volume summary - https://www.blockchaintransparency.org/
RSI summary - https://www.investopedia.com/terms/r/rsi...
MACD concise summary - http
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