Potential Reversal Scenario
I want to state from the beginning, we are very bullish at the moment. We are making higher highs and higher lows on the macro level very consistently. Therefore there is no confirmation yet to suspect we are going to do anything but continue. This is a very important concept to understand. Without confirmation a chart is simply speculation, and this is speculation.
I am a big fan of classical charting and in particular Dow Theory which states:
"A bullish trend is characterised by a series of Higher Highs and Higher Lows.
A trend reversal occurs when the price creates a lower low."
However one of the tenants of Dow Theory is to be coignisant of trend reversals, and to act upon them when you see a trend reversal confirmation. Here I will be presenting a case for a reversal, which I will be monitoring over the next few days.
Firstly some history of uptrends the last 8 months.
Crypto is a very sentiment driven market, as such when we uptrend we tend to see large exuberant uptrends which are characterised by large moves up, short consolidations and further large moves up. We are seeing the exact same build up here. The unfortunate thing about these type of uptrends is that they are very prone to blow off tops, which are news and sentiment driven.
Generally when looking for a reversal pattern we are looking for some kind of double top, triple top, head and shoulders or spike top. The double top confirmed with divergence has been pretty consistent so far over the last 8 months, so that's what this speculative analysis will focus on.
NB. We can't ignore triple top, head and shoulders or v spike reversals though and should continue to be aware of those too.
Most of the details of previous trends are on the chart and clear to see, we have double tops confirmed with either hidden or regular bearish divergences.
What would confirm another bearish divergence reversal would be this:
So there we go - I'm going to monitor it, and I'll repeat again this is not confirmation yet and I won't be putting money on this as there's nothing to bid on yet without confirmation. It should simply be monitored.
This stuff is always applicable because at some point we will reverse, so it's worth keeping an eye on.
I want to state from the beginning, we are very bullish at the moment. We are making higher highs and higher lows on the macro level very consistently. Therefore there is no confirmation yet to suspect we are going to do anything but continue. This is a very important concept to understand. Without confirmation a chart is simply speculation, and this is speculation.
I am a big fan of classical charting and in particular Dow Theory which states:
"A bullish trend is characterised by a series of Higher Highs and Higher Lows.
A trend reversal occurs when the price creates a lower low."
However one of the tenants of Dow Theory is to be coignisant of trend reversals, and to act upon them when you see a trend reversal confirmation. Here I will be presenting a case for a reversal, which I will be monitoring over the next few days.
Firstly some history of uptrends the last 8 months.
Crypto is a very sentiment driven market, as such when we uptrend we tend to see large exuberant uptrends which are characterised by large moves up, short consolidations and further large moves up. We are seeing the exact same build up here. The unfortunate thing about these type of uptrends is that they are very prone to blow off tops, which are news and sentiment driven.
Generally when looking for a reversal pattern we are looking for some kind of double top, triple top, head and shoulders or spike top. The double top confirmed with divergence has been pretty consistent so far over the last 8 months, so that's what this speculative analysis will focus on.
NB. We can't ignore triple top, head and shoulders or v spike reversals though and should continue to be aware of those too.
Most of the details of previous trends are on the chart and clear to see, we have double tops confirmed with either hidden or regular bearish divergences.
What would confirm another bearish divergence reversal would be this:
- A second top similar to 84xx. The key S/R levels at 85xx and 88xx certainly wouldn't be unreasonable for higher tops.
- For that top to break down.
- Depending if it's a higher top we would look for a lower RSI. If it's a lower top we would look for a higher RSI.
- For this to be done on declining volume.
So there we go - I'm going to monitor it, and I'll repeat again this is not confirmation yet and I won't be putting money on this as there's nothing to bid on yet without confirmation. It should simply be monitored.
This stuff is always applicable because at some point we will reverse, so it's worth keeping an eye on.