Calm Before The Storm
Crucially, the price bounced off the all important $5800 (green), but since then has been content to meander sideways, unable to push decisively through the (orange). During periods like this, it can be tempting to dismiss the market as calm or stagnant and switch off from potential trading opportunities. This can be costly, as low generally precedes impulsive, violent moves. Ergo, the calm before the storm!
Use of the indicator is very useful to identify moments of low also known as squeezes. A squeeze (red circles) occur when the two outer bands are drawn close together. As can be seen on the chart, previous occurrences of a squeeze is followed by an impulsive move in either direction. Compared to these previous examples, we could still potentially squeeze further, but there is no doubt the bands are tightening at this point in time.
There is a signaled by the which is a . Whilst the price fell over this period, the moved higher (red arrows). This signals a loss of downside momentum and a high likelihood of a reversal which is what has transpired. It is encouraging to see such a clear reversal signal above the all important $5800 . Furthermore, there is a potential setup, albeit a messy one that you won’t find in the textbook. Nevertheless, the price has made higher highs and higher lows and that’s all a pattern really pattern is.
In summary, should the continue to squeeze tighter I’ll be looking to place a long break order position in anticipation of a break to the upside. A long break order is a buy order placed above the current price. Therefore, my buy order will only trigger after an upside breakout. If this scenario plays out, I expect the momentum from the squeeze to be strong enough to see the price push through the . From here there is a fairly clear run to the resistance where I will look to take profit.
A ship cannot sail without wind and trader cannot make money without . In crypto, one seldom has to wait long before the breeze begins to pick up once again.