I want to highlight the many signs of trend exhaustion here in this daily chart of the Dow Jones index.
We will start at the top, appears to be a bit of a ceiling with 6 days of touches right on the level of 35520. In an uptrend such as this chart is displaying, I would think pressure is building around this level and let's look for a breakout of trend continuation.
I can also point to the trend line I have drawn as a buy point on three occasions in the past, for this current trend, and acting as a possible buy point today. As far as trend continuation, those two thoughts of pressure building and trend line buying are the only positive factors I see.
Now, what makes me stop from buying this so called dip:
Price is currently just under the 50 day MA. For me the next level is the 100 day MA. I want to see that hold first before an entry is initiated.
Also for me, a trend line with at least three touches that has been in play as long as this said trend line has been, holds credit. It is also very clear to see. Trend lines are very subjective, each to their own, but give me three or more touches that is extremely clear to see, I like it. The fact that it is over six months in play is just a bonus but time length should not be ignored.
Now when trend following the terms confluence and divergences are very important when considering an entry. With indicators I can identify these concepts on a price chart.
On this chart is your basic volume bars, a bit arbitrary, but in the context of this particular trend I believe I have found divergence as to the downward sloping line I drew and the fact that price itself has continued to raise.
I also recently started using the PVT, Price Volume Trend. It gave me a divergence in ETH-USD as price was just recently building pressure under $4000.00. I had bought the break from range at $3400.00 and wanted to add to it before the breakout of $4000.00. The PVT showed pretty clear divergence so I stayed away waiting for a confirming breakout of $4000.00. That would be an after the fact post so let's see if the divergence here holds true and we see a drop.
Now back to this chart. Both volume indicators show a downward sloping line and price has continued to raise. But you cant determine divergence until the high of 35098 on May 10 2021 is taken out which occurred on July 26th, 2021. And the most recent all time high of 35636 on August 16th, 2021 also shows price moving in one direction and the indicators moving in the other direction.
I like how the volume bars show less and less, plus the most major volume since March of this year have been red bars. Put that with the PVT also showing less flow from the recent highs of 35098 and 35636 respectively, I see clear divergence.
What makes this setup really interesting to me is the major trend line I have drawn. To me that is the money line. If that line gets a clean break, back and retest support turned resistance than I see a drop to the 200 day MA, at some point after the break. That would be the next level anyways in my opinion of possible support.
Two positive factors for trend continuation: Trend line is holding and pressure built around the 35515-35520 area.
Negative factors: Price below the 50 day MA. A bit of a ceiling. Divergence on two indicators that are used for trends. Also a bit of pressure on the current trend line I have drawn which IMO, if breaks will proceed to a move further to the downside with the 200 day MA being a possible level of support.
I also have to add in my current fundamental view: Seems like Covid cases are raising everywhere, plus the new mutations seem like a negative. The Fed must hit the brakes at some point, and the whispers are starting. Plus the president's tax plans to go after the top earners also seems very bearish to me. Get an interest rate raise from the Fed plus the wealthy getting taxed more, or just the Fed's bond buying program stopping, and we might actually see what 2020 was supposed to be like.
We will start at the top, appears to be a bit of a ceiling with 6 days of touches right on the level of 35520. In an uptrend such as this chart is displaying, I would think pressure is building around this level and let's look for a breakout of trend continuation.
I can also point to the trend line I have drawn as a buy point on three occasions in the past, for this current trend, and acting as a possible buy point today. As far as trend continuation, those two thoughts of pressure building and trend line buying are the only positive factors I see.
Now, what makes me stop from buying this so called dip:
Price is currently just under the 50 day MA. For me the next level is the 100 day MA. I want to see that hold first before an entry is initiated.
Also for me, a trend line with at least three touches that has been in play as long as this said trend line has been, holds credit. It is also very clear to see. Trend lines are very subjective, each to their own, but give me three or more touches that is extremely clear to see, I like it. The fact that it is over six months in play is just a bonus but time length should not be ignored.
Now when trend following the terms confluence and divergences are very important when considering an entry. With indicators I can identify these concepts on a price chart.
On this chart is your basic volume bars, a bit arbitrary, but in the context of this particular trend I believe I have found divergence as to the downward sloping line I drew and the fact that price itself has continued to raise.
I also recently started using the PVT, Price Volume Trend. It gave me a divergence in ETH-USD as price was just recently building pressure under $4000.00. I had bought the break from range at $3400.00 and wanted to add to it before the breakout of $4000.00. The PVT showed pretty clear divergence so I stayed away waiting for a confirming breakout of $4000.00. That would be an after the fact post so let's see if the divergence here holds true and we see a drop.
Now back to this chart. Both volume indicators show a downward sloping line and price has continued to raise. But you cant determine divergence until the high of 35098 on May 10 2021 is taken out which occurred on July 26th, 2021. And the most recent all time high of 35636 on August 16th, 2021 also shows price moving in one direction and the indicators moving in the other direction.
I like how the volume bars show less and less, plus the most major volume since March of this year have been red bars. Put that with the PVT also showing less flow from the recent highs of 35098 and 35636 respectively, I see clear divergence.
What makes this setup really interesting to me is the major trend line I have drawn. To me that is the money line. If that line gets a clean break, back and retest support turned resistance than I see a drop to the 200 day MA, at some point after the break. That would be the next level anyways in my opinion of possible support.
Two positive factors for trend continuation: Trend line is holding and pressure built around the 35515-35520 area.
Negative factors: Price below the 50 day MA. A bit of a ceiling. Divergence on two indicators that are used for trends. Also a bit of pressure on the current trend line I have drawn which IMO, if breaks will proceed to a move further to the downside with the 200 day MA being a possible level of support.
I also have to add in my current fundamental view: Seems like Covid cases are raising everywhere, plus the new mutations seem like a negative. The Fed must hit the brakes at some point, and the whispers are starting. Plus the president's tax plans to go after the top earners also seems very bearish to me. Get an interest rate raise from the Fed plus the wealthy getting taxed more, or just the Fed's bond buying program stopping, and we might actually see what 2020 was supposed to be like.