BTC : 5Day MACD Fib WavesBitcoin Bitstamp 5Day moving average convergence/divergence
and fibonacci-based primary and secondary sine wave structures
established from historical MACD positive and negative momentum.
The MACD is displayed using the standard fast and slow lengths of 12 and 26, respectively.
Signal smoothing length is the standard value of 9.
For visual clarity, the signal line is not displayed...
but I have left in the colored fill between the MACD line and signal line,
so you can still see where the signal line would be.
Also included is the colored fill between the MACD and zero line.
The wave structure template used in this idea is roughly relative to a standard fibonacci channel,
using the following levels : 0, 0.214, 0.236, 0.50, 0.764, 0.786, and 1.00.
The primary fib wave template is displayed using solid lines.
The positions of the upper and lower bounds of the wave structure
are established using the March/April 2021 high, and the June/July 2022 low.
The horizontal positioning of the wave structure is established
using the March/April MACD high for the lowest wave value.
The highest value of the 1.00 wave (amplitude), as well as its' wavelength,
is established using the 0.50 midline level interactions...but more on that soon.
Note,
while the build and placement of the fib wave structures mimic a standard fib channel, it is not exact.
Looking closely, you'll notice that the midline isn't exactly in the middle of the 0 and 1.00 wavelines.
The structure compresses towards the bottom, thus it is not vertically symmetrical.
Either way, these fib wave levels surely line up with the MACD rather impressively.
Also of note,
by applying a horizontal fibonacci channel using the lowest values of the 0 and 1.00 wave levels,
and adding 0.35, 0.382, 0.618, and 0.65 to the existing levels,
one can see interesting interactions between the MACD and these horizontal levels.
Returning to the primary wave structure...
we can see some very interesting interactions between the MACD and the waves.
Here we look at the pink/blue wave levels :
And here, we look at the 0.50 green midline :
These midline interactions were used in creating the amplitude and wavelength of the entire wave structure.
By looking at all the interactions, I believe that it is fair to assume
that interactions similar to these could occur in the future
when the MACD reaches the various levels of this fibonacci wave structure.
Ok.
So what if, in the future, the MACD reaches beyond the upper and lower bounds of the fibonacci wave structure?
My first thought was to just extend the current wave structure
by adding more levels above and below the existing structure :
This could indeed be useful.
But, when I looked at the current structure, and then looked at historical MACD values before 2017,
I concluded that this structure doesn't necessarily apply to that data.
If I were to predict future MACD action beyond this structure,
especially a massive logarithmic rise/drop similar to what happened at the end of 2020/beginning of 2021,
I would need to think about this completely different, and find a another method...
one outside of simply adding more levels above and below the existing structure.
What did I find?
Let's return to the midline interactions that we looked at earlier.
We see the MACD hits the green midline and reverses 3 times before breaking through the it,
and then the MACD rises to the white 1.00 fib wave level.
I realize the following might be reaching a bit far,
but, what if this particular MACD behavior pattern occurs again in the future?
If the possibility of this occurring again exists,
is there any existing MACD data that I can use to form an entirely new fib wave structure?
A new structure that when placed properly, allows this behavior pattern to occur once again?
Here is what I found.
I can place a brand new wave on the chart, one with a larger wavelength, and a much larger amplitude.
I can modify its' wavelength, amplitude, and position,
so that it mimics the midline of the existing wave structure, but on a larger scale.
Take a look... here it is, displayed with a dashed line :
Now I ask, is it possible to estimate the other levels of this new structure using this waveline
and any existing MACD data?
Here is what I found :
Is this stretching a bit too far? Maybe.
But, I think that this way of thinking is what is necessary to imagine
what the MACD may look like in the future if there is a massive logarithmic swing in either direction.
And of course, because this new fib wave structure is built using less data than the previous structure,
and involves more estimation, it is likely to be less accurate as well.
So, if all of this possibly plays out, what would the MACD look like if it did reach these types of levels?
Well, using an unpublished pinescript indicator that I wrote,
I can give you an idea of what it would look like...
If you take all of the existing MACD data, offset it horizontally to the right by 500,
and then multiply the values by 4.20, you get this :
Awesome, right?!?!
Interestingly, this projection also fits the initial fib wave extensions
that I used in one of the previous images above. Take a look :
So, in conclusion, this is how I created the main chart of this idea.
I tried to include my logic and reasoning behind it.
Is this useful? I think so.
Naturally it depends on several factors such as whether you agree with the logic and conclusions of this idea,
whether you use the MACD to help you trade, the timeframes of your trades, as well as your trading style.
If anything, I think this chart is definitely worth looking at every now and then,
especially when the MACD gets close to the various levels.
Regarding sine waves, I have found some other waves that can be applied to the MACD that could prove useful.
I refer to them as sub-waves. These are not placed within a unifying fib structure...
they are individual waves, each with different amplitudes and wavelengths.
All sub-waves :
I think that these sub-waves can be useful at levels in between the fib wave levels of the two main structures,
and overall help add to the validity of the notion of using sine waves in conjunction with an MACD while trading.
Finally, here is a bonus 5Day MACD fib grid image...
Thank you for checking out my idea.
I hope it makes you look at sine waves, fibs, and the MACD differently.
Please give it a boost if you liked it, and feel free to comment.
//Durbtrade
