Barts (AKA bull or bear traps) are a common pattern in cryptos. The OBV indicator can be useful for detecting Wyckoff style accumulation or distribution.
It's especially useful for Barts which have a very flat section of price action which makes the OBV divergence very apparent in some cases. If you see a flat zone that looks like a potential bart, track it on a couple different time frames and see if a divergence pops out, it might show which wyckoff mode it's in.
I appreciate all of your insights and analysis, thanks friend. Does this analysis need to be done on Bitstamp? Can we simply factor decreasing OBV as a bearish signal? Does it show up on some timeframes more than others? Sorry for the 20 questions, I just love this kind of stuff.
mljones
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@jaggedsoft, Sure thing. It does not need to be done on Bitstamp, for OBV to work it needs data with volume so it would not work well with forex.
Other than that, the Bart pattern itself is not especially common. I've seen it occasionally in crude oil futures and I imagine it can happen anywhere but it's more common in cryptos for some reason.
The thing that makes Bart stand out to me is that because it has the very flat line of price action, analysis on it is less subjective for finding divergences. For instance if you try the divergence on 4 hour bars or 1 hour bars you might get a different pattern on the momentum indicator but the pattern on the price action stays pretty much the same.
This reduces one degree of freedom in over mining the data and means the results are possibly more robust than if both the price and the indicator are at various angles.
Here's an example of small barts on a 1 minute BNB chart.
For these I noticed the bart pattern works best when the dump out goes with the trend. In fact on that chart what makes then stand out on OBV is the initial left side of bart's head is almost nothing and sometimes goes in reverse direction compared to the initial vertical thrust on price itself.
I noticed that Barts that appear as a major top or major low do not work well with OBV this way, they tend to look the same on OBV as the original price action.
The reason I'm using OBV for this is because Wyckoff is dependent on watching for volume to dry up to tell when a trading range is going to break out soon.
> Can we simply factor decreasing OBV as a bearish signal?
No, I would not make it quite that simple. There's a pretty good youtube series that starts with "#1 analyzing and trading markets using the wyckoff method" which goes into this type of thing using a drying up of volume, although it doesn't mention OBV exactly it covers the basic ideas why it works and also why higher volume is not always a sign of a breakout.
> Does it show up on some time frames more than others?
It seems like barts happen because one or two whales are holding price in one spot. I don't think they're an organic shape that results from lots of independent market participants, so they probably are shorter timeframe kinds of patterns that happen more during lower volume periods. I would not expect to see them happen at all during the next super bull market, they're more common during bear market doldrums.
BTW your megatrend indicator is top notch stuff!!! Thanks for making it available!