BITSTAMP:BTCUSD   Bitcoin / U.S. Dollar
Analysis based on Dow Theory.
A sequence of LLs and LHs is called downtrend. A decline from Relative High to Relative Low is called a major phase (impulse). A rally from Relative Low to Relative High is called a corrective phase (reaction, pullback, recovery). Major phase + corrective phase form full cycle. In other words a cycle in a downtrend is a movement started from Relative High going through consequent Relative Low and to consequent Relative High. The downtrend is considered broke when instead of installing a LH price goes to HH. In this case the movement from the most recent Low to a new Higher High will be the first major phase of a potential uptrend. As you see the last major phase of the downtrend is not followed by a corrective phase but is followed by the major phase on an uptrend. This means that the last downtrend cycle stays incomplete. That's why it is called half-cycle. ALL trends end in half-cycles.
Volume expands in the major phases of a trend and contracts in corrective phases. If price installs a major phase but volume doesn't expand this indicates that we potentially have the last half-cycle of the trend. If volume expands in the major phase and then it expands even further during the corrective phase this indicates that this corrective phase will most likely turn into a major phase of an opposite trend.
The major phases of two adjucent cycles tend to show harmony both in amplitude and in time. AB=CD , Three Drives Pattern based on this phenomena. But corrective phases also tend to be equal in price and time. Reciprocal AB=CD or 5-0 Patterns exploit this phenomena. In the majority of cases major phases are steeper than corrective phases. This means that less bars required for a major phase to travel its amplitude than for a corrective phase to recover even the part of it.
Comment: Here's the entry technique that can be executed to enter short:
Comment: a price started to decline earlier and the bat didn't complete here's another pullback trading opportunity. Wait for price to enter the sell zone to have at leas 1-to-1 risk to reward. Essentially the higher you execute your trades the greater is your profit and the less is your risk.
Excellent educational post.
+1 Reply
@BOB1435, you are welcome:)
fehimsahan BOB1435
@BOB1435, Indeed. Good one. Thank you
@fehimsahan, you are welcome as well:)
Great post. Can you recommend any book about Gartley patterns?
@Acel, H.M Gartley "Profits in the Stock Market", Scott Carney "Harmonic Tariding, Vol1"
+2 Reply
Acel PRO Alexander_Nikitin
@Alexander_Nikitin, damn that first one is so old! I will start with the second one and maybe read the original sometime. Thanks !
Really interesting to see new way to see things, I don't understand the 10700 sell zone (short) if it's gonna come down further? You mean that it will go back up to 10700 before reaching a new low? Seems unlikely as of right now, enlighten me! Thank for your analysis.
@xilef94, I don't mean it will go back there. But if it did then I could be a nice entry based on the bat.
@xilef94, It is not a new way of seeing things. The Dow Theory is 120+ years old.
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