Important notice: To avoid misunderstanding between us, try not to be confused when I am talking about MACD line and about MACD as an indicator.
For better understanding I will explain why I applied these concrete tools and for what purposes I changed standart parameters in MACD indicator. And after We will interprete what the ones show us.
I will start with Moving Averages (121 and 20). In my previous analysis I used similar approach but in this case I changed 40 MA by 20 MA, because I needed faster line and at my look this line better:
a) Interact with price actions
b) Interact with 121 MA
c) Reflect price actions
20 MA cleaned up all the noise that we see on a Price Chart (spikes and bounces), plus we also can see when this line changed its directions, market have gotten key points after that we saw Market changed its Short and Mid Term trends and even changed its environment and incomed in periods with absence of volatility.
121 MA (which I used in one of my previous analysis) - is very useful on its own and I will repeat some of advantages of this line from previous idea. This 121 MA serves as a Dynamic Support/Resistance for the price when this line is below or above the one. Also when Price Chart break through 121 MA it signals about trend reversals. (I would say Mid Term trend reversals). But working in tandem with 20 MA this line helps to absorb fake breakouts. You can see on the Chart when Price made fake breakouts through 121 MA, the 20 MA reversed and denied trend reversals (in other words it provides more reliable signals than the Price Chart itself). At this point I would finish with MAs and go to most interesting - it is MACD indicator.
As you know MACD indicator uses 12 and 26 EMAs for its calculations, and forms MACD line by subtracting the 26-period EMA from 12-period EMA, well it is in standard.
In my particular case I changed the parameters of the MACD indicator and now it uses 20 and 121 MA for its calculations (I only saved standard parameters for Signal line) and on first look seems that there is no need in such actions. In some way now MACD just reflects the relations between those MAs and the Price Chart together. So now it looks like We just have the same instrument, but with a different look.
Is it the same tool? Of course the answer is no. And I will explain why.
The MACD is a trend-following momentum indicator. Traders use this tool to find buy/sell signals. But with standard settings this indicator can provide false signals. And if we apply Moving Averages that proved their effectiveness (20 and 121 in my case) then MACD becomes a very powerful tool.
Done with explanations, and go to analysis:
We see on the Chart a Bearish crossover which is a sign of Trend reversal and as I wrote in my previous idea we are facing a Mid Term downtrend. To find some more interesting things that can happen during this trend we can look at MACD indicator, and see the behavior of the Market from a different view.
First: on MACD indicator we see that MACD line crossed its baseline and moving down, which means that this trend is strengthened. (This thing just reflects the effect of Bearish cross, but helps to see things clearer and indicate where Market moving to //Just like in case with 20 MA it removes the noise)
Second: We had a rapid fall and MACD shows us that there is a possibility for a retracement. Rapid Fall/Rise - when MACD rises or falls rapidly (the Shorter-Term moving average pulls away from the Longer-Term Moving Average), it is a signal that asset is overbought or oversold and will soon return to normal levels. As have been said above Market changed its trends and conditions when 20 MA changed its direction. But it's too difficult to define these moments in real time, they need confirmation. Crossovers between MACD line and Signal line shows the same thing and are simpler to define, so we can be prepared to it since we see MACD line and Signal line converging or by histogram (personally I recommend to watch for lines' behavior rather then on histogram)
Because I admit the possibility of a retracement and MACD indicator does too. I tried to use these tools to help me define how strong this movement might be and how to catch this movement in case it occurs. Crossover between MACD line and Signal line would be a great sign that retracement on its way. But how far it can go? Here we can use our 121 MA as a resistance and based on this indicator the resistance must be not higher than $10.000 level (approximately), in case there is a fake breakout it will should not get higher than $11.000 level (approximately), this value based on a historic fake breakout in 24 Jul 2018. You should also watch for behavior between 20 and 121 MAs, it can help you to absorb the fake breakout. If price will be able to break through $10.000 level, that 20 MA won't have to break through the 121 MA. (The relations 121 MA and 20 MA are more reliable comparing to relations 122 MA and a Price Chart)
This analysis and my previous analysis about Mid Term downtrend tell that this trend is strong enough. Because of this I gathered interesting levels to work with, you will see them below.
Interesting levels and zones where price can consolidate during this Trend or find temporary support and resistances.
$7.300 (previous )
$6.700 (previous )
$6.000 (previous )
$5.400 (previous )
$4.800 (23.8% Fib level and previous resistance)
(These levels are approximate and not exact)
Conclusion: The retracement from the level we have now (possible a little lower)
would be a great action against retail investors who are waiting to initiate long positions after the Price changes its direction. (My personal and very subjective opinion mainly based on the information I saw from different resources and on ratio Longs vs. Shorts (by BitMEX, Bitfinex)
(73% vs. 27% Bitfinex; 58% vs. 42% BitMEX; Total: 63% vs 37% 05.10.19)
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Remember this analysis is not 100% accurate. No single analysis is. To make a decision follow your own thoughts.
The information given is not a Financial Advise.