Volume and MACD situation on BTC shows signs of weakness
Updated
Volume is used to confirm our biases on chart patterns and trends and lots of studies are done on how different chart formations are confirmed with volume. Likewise when looking for a breakout people often look at the volume to consider if it will be maintained or if a chance of throwback is likely. Generally people look at volume by time and the OBV does that well.
On Balance Volume[b/]
Many volume analysis look for bullish or bearish divergences and you can also put some moving averages on the volume to see what is going on for the last so many periods. Here I have the 10, 20 and 100. Much like any moving averages crosses can provide useful signals. This volume situation is pretty bearish. Price has to go a long way to the upside for the OBV to get above the 100 EMA long enough for the 10 and 20 to get above the 100 again and complete a bullish stack.
Significant rallys are possible with the OBV below the 100 and the OBV, 10 and 20 can do a lot of braiding and changing of position but large dumps are very probable afterwards.
It also a bearish sign that the on balance volume is setting a lower high while price action is setting a higher high with some of these topping candles. The candlestick pattern isn't complete yet but it is staged bearish.
Volume Profile Visible Range
Right now price is stalling at this volume node. It isn't particularly large but it does coincide with previous support around %49.5k and the 0.786 fib retracement level (not shown). The center of the next node of volume support is lower than many analysts I listen to are calling at about 35k To me that isn't a solid target despite it being the top of the Value area as both major trendlines I see that could provide support are way benign that.
The MACD
The MACD is showing a lot of hidden bearish Divergence. The main chart does a decent job but below is the MACD settings developed by Mr. Asprey after he did some tinkering. I have split the histogram and signal line into two different charts to view the divergence more easily. Both are very divergent. This is important because hidden bearish divergence is the best indicator that a bull trap is in play.
I was using hidden bearish divergence when I was predicting a bigger spill than most prior to the dump in early May on the daily chart. Once again the chart is the MACD-AS with the signal and histogram separated. It does not take a lot to rip a uptrend to shreds.
Closing thoughts
Lots of things look bullish. On chain metrics look bullish with the Hash ribbons flashing a buy. People looking at commitment of traders also see a lot of buy interest. Lots of coins have been taken off of exchanges. All these things are generally fundamentally bullish. But the Volume situation does not seem to back up some of the fundamental bullishness. The MACD is also in a vulnerable situation. All this makes analysis complicated. We might see a vicious sell off and a rapid rebuy like the Covid 19 dump. We might see lots of people loose interest in BTC specifically while other coins stay strong.
Truth be told I am pretty uncomfortable with the disagreement in the charts and the fundamental analysis. Makes me think I am missing something and I don't like it. But right now it seems to be a bad time to be recklessly long to me. I do have a small position on short with a low level of leverage.
On Balance Volume[b/]
Many volume analysis look for bullish or bearish divergences and you can also put some moving averages on the volume to see what is going on for the last so many periods. Here I have the 10, 20 and 100. Much like any moving averages crosses can provide useful signals. This volume situation is pretty bearish. Price has to go a long way to the upside for the OBV to get above the 100 EMA long enough for the 10 and 20 to get above the 100 again and complete a bullish stack.
Significant rallys are possible with the OBV below the 100 and the OBV, 10 and 20 can do a lot of braiding and changing of position but large dumps are very probable afterwards.
It also a bearish sign that the on balance volume is setting a lower high while price action is setting a higher high with some of these topping candles. The candlestick pattern isn't complete yet but it is staged bearish.
Volume Profile Visible Range
Right now price is stalling at this volume node. It isn't particularly large but it does coincide with previous support around %49.5k and the 0.786 fib retracement level (not shown). The center of the next node of volume support is lower than many analysts I listen to are calling at about 35k To me that isn't a solid target despite it being the top of the Value area as both major trendlines I see that could provide support are way benign that.
The MACD
The MACD is showing a lot of hidden bearish Divergence. The main chart does a decent job but below is the MACD settings developed by Mr. Asprey after he did some tinkering. I have split the histogram and signal line into two different charts to view the divergence more easily. Both are very divergent. This is important because hidden bearish divergence is the best indicator that a bull trap is in play.
I was using hidden bearish divergence when I was predicting a bigger spill than most prior to the dump in early May on the daily chart. Once again the chart is the MACD-AS with the signal and histogram separated. It does not take a lot to rip a uptrend to shreds.
Closing thoughts
Lots of things look bullish. On chain metrics look bullish with the Hash ribbons flashing a buy. People looking at commitment of traders also see a lot of buy interest. Lots of coins have been taken off of exchanges. All these things are generally fundamentally bullish. But the Volume situation does not seem to back up some of the fundamental bullishness. The MACD is also in a vulnerable situation. All this makes analysis complicated. We might see a vicious sell off and a rapid rebuy like the Covid 19 dump. We might see lots of people loose interest in BTC specifically while other coins stay strong.
Truth be told I am pretty uncomfortable with the disagreement in the charts and the fundamental analysis. Makes me think I am missing something and I don't like it. But right now it seems to be a bad time to be recklessly long to me. I do have a small position on short with a low level of leverage.
Note
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