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Right-angledtriangle

NDX / QQQ Supports That May Spark the Next Bear RallyPrimary Chart: 11-Month Downtrend Lines, Support at June and September 2022 Lows Forming Right-Angled Triangle, Fibonacci Levels The Nasdaq 100 ( NASDAQ:NDX or NASDAQ:QQQ ) has been in a sharp downtrend nearly all year with intermittent bear rallies that have been sharp and powerful. A week ago, despite price having already fallen significantly from August 16, 2022 peaks, this author identified the likelihood that the downtrend would continue even further to short-term targets at $269-$270. (More aggressive targets in a range from $254 to $267 were also identified in the September 2022 post, but those have not been reached yet.) Now that price has fallen almost exactly to the June 2022 lows, a support line across those lows can be drawn—and this support level intersects with the downward trendlines (there are two alternative downward trendlines on the Primary Chart). When these two support levels intersect with the downward trendlines, a right-angled triangle is formed. This is also known as a descending triangle. Because this is a multi-month triangle, it may not break easily; however, this bear market has broken conventional expectations repeatedly, so anything is possible. But price could make more than one attempt to break the lower edge of the triangle before succeeding. The next chart shows one such possibility. Note that there are many possibilities, and this remains just a single hypothetical price path that reflects the concept that horizontal line of a multi-month right-angled triangle might not break on the first attempt as lesser supports can. Supplementary Chart A: Right-Angled Triangle with Hypothetical Price Path Involving Whipsaw Break Before a Successful Break Later in the Year This hypothetical possibility does not make the chart bullish. It just recognizes that price action can work to confound bears and bulls alike. And it acknowledges that price can reach oversold extremes right at critical multi-month supports, which may require two or more attempts to break. Whipsaws are not uncommon on both intraday and longer-term time frames. Even though the NDX / QQQ remains within a strong downtrend, the sharp rallies this past year have shown that even the bears have to be ready for anything. Bears anticipating a straight line lower can get annihilated. The lower edge of this right-angled triangle is also right at multi-year support identified in the above-referenced post published September 22, 2022. Like a multi-month triangle, multi-year support may not break on the first attempt. Or if it does break in the next week, the first break may end up being a whipsaw break, that leads to price recovering back above the support (and lower edge of the triangle) to rally or chop further until the final break, which could be weeks or months away. Supplementary Chart B: Multi-Year Support Level (Blue Rectangle) The .618 retracement level is another level of interest that could hold and spark another bear rally. This level is the yellow line on the next chart, and it lies at $258 on QQQ. Another Fibonacci level has confluence with the .618 R, and lies just beneath it (teal blue). Supplementary Chart C: Two Circles Identifying Target Zones That Could Spark the Next Bear Rally ________________________________________ Author's Comments: (1) Thank you for reviewing this post and considering its charts and analysis. The author welcomes comments, discussion and debate in the comment section. Shared charts are especially helpful to support any opposing or alternative view. (2) This technical-analysis view does not constitute a trade recommendation or trade setup. Instead, it attempts to offer technical commentary that describes and analyzes price levels, trends, price action, or the broader technical environment as of the publication date. Technical-analysis commentary does not equate to trade setups or recommendations. Within a given price environment, traders bear responsibility for their own trading strategy, risk tolerance, and time frame, and for any due diligence associated with such trades. (3) This technical-analysis viewpoint could change at a moment's notice, e.g., when price violates a key level of invalidation for a particular view. Further, proper risk-management techniques are vital to trading success. (4) To the extent countertrend price moves are discussed, consider that countertrend or mean-reversion trading, e.g., trading a rally in a bear market, remains higher risk and lower probability even for the most experienced traders and investors. DISCLAIMER: This post contains commentary published solely for educational and informational purposes. This post's content (and any content available through links in this post) and its views do not constitute financial advice or an investment or trading recommendation, and they do not account for readers' personal financial circumstances, or their investing or trading objectives, time frame, and risk tolerance. Readers should perform their own due diligence, and consult a qualified / licensed financial adviser or other financial or investment professional before entering any trade, investment or other transaction.
NASDAQ:QQQ
by SquishTrade
6
Could BTC's Trendline End Not with a Bang But a Whimper?Primary Chart: Fibonacci Channel and Symmetrical Triangle Title alludes to a well-known excerpt from T.S. Elliot's poem called "The Hollow Men": This is the way the world ends This is the way the world ends This is the way the world ends Not with a bang but a whimper. Setting Aside Bias Temporarily to Allow Greater Flexibility in Analysis Many of my recent posts on cryptocurrencies have been presented with a bearish bias. A bearish view has been warranted, after all, because the technicals have left almost no room for a bullish short-term or intermediate-term view. Some of my recent posts have been neutral, however, to evaluate and explore more fully all possibilities within the context of support and resistance levels, price action and other technical factors. Unfortunately, BTC's price chart has not yet turned bullish given the price structure. And positive / bullish divergences mentioned by some long-term crypto investors cannot count until they are confirmed by a reversal in trend structure. This post attempts to set aside bias temporarily to present a variety of technical evidence as objectively as possible. The goal is to remain relatively neutral to allow a more complete examination of the price charts and technicals without the influence of a particular predetermined goal or conclusion. This might allow for greater flexibility to follow the unexpected turns that prices often take. BTC's Relative Strength in Recent Weeks In a recent bearish post, after listing several arguments for the bears, I discussed one argument for the bulls—BTC's relative strength. On October 2, 2022, my post stated: "One argument for the bulls is that BTC's sideways chop action has resulted in its relative strength becoming quite impressive. Equity indices have been plummeting sharply since mid-August 2022 with little reprieve. But BTC during this time has largely chopped sideways after losing a few key levels in late August and early September 2022." This relative strength can be examined more closely by looking at a spread chart that divides one instrument's price by the price of an index or some other price reference for comparison. The chart below shows a spread (or ratio) chart of BTC / SPX, showing BTC's relative strength compared to a leading equity index, the S&P 500 ( SP:SPX ). Supplementary Chart A: Spread Chart Showing BTC's Relative Strength vs. SPX www.tradingview.com Note how this spread chart has broken above a nearly 11-month downward trendline. Some may draw the conclusion too quickly that this suggests a trend reversal, such as from a downtrend to an uptrend. But a break above a down trendline by itself merely suggests a shift from that particular downtrend to either a less steep downtrend or a more neutral trend, which could then lead to a period of sideways chop for some time or it could lead to a trend reversal as well. But a reversal to an uptrend requires a change in trend structure, which is a process that takes time to form and has not occurred yet. Another aspect of BTC's relative strength exists. It has not broken its June 2022 lows as many equities and equity indices have done. Until that changes—it could break those lows at any time—this technical evidence is an alternative way of viewing BTC's relative strength. BTC's relative strength has improved even though BTC has largely churned and chopped sideways for the past weeks and months. This is because many asset classes have been steadily declining, some even plummeting, since mid-August 2022 peaks. Any asset or instrument will have relative strength when it moves sideways while equity indices continue to decline. The sideways consolidation will be discussed in greater detail in the next section. BTC's Recent Consolidation and Volatility Compression BTC's price has chopped steadily around a key Fibonacci level of $19,246 for the past several weeks since mid-September 2022, and even for a number of days in late August 2022 as well. This consolidation has been noteworthy given that equity indices have plummeted during this time. When an asset moves sideways while equity indices steadily decline results in relative strength (outperformance) of that asset as discussed in the previous section. Supplementary Chart B: Recent Consolidation Range Containing Price And during this lengthy consolidation, the compression in volatility has been quite significant. The next chart compares the levels of volatility by using a famous volatility indicator called the Bollinger Bands (set at 2 standard deviations from the mean) on a daily chart. Parallel channels have been drawn over various sections of the Bollinger Bands to give a visual comparison of the volatility levels and volatility compression levels over the past several months. Note how wide the Bollinger Bands expanded as a result of the high volatility associated with steep selloffs. And the periods of volatility compression (squeezes) often preceded those periods of high volatility and large directional moves downward. Supplementary Chart C: Bollinger Bands (2 Standard Devations) with Channels for Visual Aid in Comparing Volatility Levels Most importantly, note how the tightly compressed the current volatility in price has become, i.e., note how narrow, the Bollinger Bands are now. They are more narrow perhaps than at any other time during this bear market. If history is any guide, such a period of compressed volatility (a squeeze) implies that a sizeable increase in volatility associated with a large directional move will soon follow. Because the trend has been down, the odds would seem to favor a downward flush. But BTC's relative strength causes one to wonder whether a massive bear rally may be imminent. So traders should be prepared for any scenario where price could move dramatically. This is why my stance became more neutral for purposes of a thorough evaluation of price action. Because BTC is at a make-or break juncture in the short-to-intermediate term, it helps to stay open to all possibilities rather than staying rigidly fixated on the obvious bearish view. Being flexible and nimble can help traders remain more keenly aware and prepared for shifts that can occur at any time. VWAPs and Linear Regression Channel Even if the charts may be shifting in subtle ways, some of the technical evidence still firmly supports the existence of a downtrend. Shorter-term VWAPs \ show that the current price remains under the volume-weighted average price for a variety of different lookback periods. This means that the average buyer is losing money and the average seller remains in control for each of these VWAP periods. Supplementary Chart D: Various VWAPs from All-Time High, March 2022 High, June 2022 / YTD Low, and August 2022 High Further, longer-term VWAPs remain in favor of the bears as shown in a separate post from September 24, 2022 (linked as Supplementary Chart E below). The linear regression channel from the all-time high to the present, which was drawn a few days ago (also linked as Supplementary Chart E), suggests that the downtrend remains very much in effect, and that evidence should not be dismissed. Supplementary Chart E: Linear Regression Channel and Long-Term VWAPs Price at Apex of Various Consolidation Triangles The consolidation in price may be viewed from another helpful perspective—the various triangles that have formed. Triangles generally develop as a narrowing trading range (consolidation) as upper and lower trendlines converge under compressing volatility conditions. The Primary Chart shows a symmetrical triangle, which by definition does not imply a direction to the breakout. Price has reached the very apex of this triangle. Price has also reached the apex of two other right-angled triangles shown below. Right-angled triangles (also called descending or ascending triangles) do imply a directional bias via the sloping trendline that intersects with the horizontal trendline. In this case, the two alternative right-angled triangles (shown in Supplementary Chart F below) imply a downward directional breakout. But right-angled triangles, like other technical patterns and indicators, do not work perfectly to guarantee that the breakout will occur in the implied direction. Some right-angled triangle breakouts occur in a direction opposite from what is expected, which can make the breakout even more sharp because it catches market participants off guard. Supplementary Chart F: Multi-Month Right-Angled Triangle Supplementary Chart G: Second Right-Angled Triangle BTC's Price at Critical Juncture In conclusion, BTC's price now trades at a critical juncture. A breakout in price from the very apex of several different triangles could occur within a day or two. The compression in volatility has been quite substantial, implying a larger than normal directional breakout move. Combine this compression in volatility with the fact that BTC has not made a new low, has shown relative strength vs. blue-chip indices, and it would seem that traders should be prepared to react to whatever might happen. Price has also reached the 11-month downtrend line shown on the Primary Chart as the zero line of the Fibonacci Channel. Price could continue chopping sideways right through that down trendline without much ado. That would perhaps be one of the most frustrating outcomes for bulls and bears alike, which is why the title to this article was chosen. And at this point, it would appear that just about anything can happen—an eye-popping bear rally, a few major whipsaws up and down over the next several weeks, a major continuation move in the downtrend. Or price could just drift sideways through the 11-month downtrend line, ending it not with a bang, but a whimper. While predicting may feel satisfying, the better approach in this case may be to wait and allow price to tell us which way it wants to go. ________________________________________ Author's Comments: (1) Thank you for reviewing this post and considering its charts and analysis. The author welcomes comments, discussion and debate in the comment section. Shared charts are especially helpful to support any opposing or alternative view. (2) This technical-analysis view does not constitute a trade recommendation or trade setup. Instead, it attempts to offer technical commentary that describes and analyzes price levels, trends, price action, or the broader technical environment as of the publication date. Technical-analysis commentary does not equate to trade setups or recommendations. Within a given price environment, traders bear responsibility for their own trading strategy, risk tolerance, and time frame, and for any due diligence associated with such trades. (3) This technical-analysis viewpoint could change at a moment's notice, e.g., when price violates a key level of invalidation for a particular view. Further, proper risk-management techniques are vital to trading success. (4) To the extent countertrend price moves are discussed, consider that countertrend or mean-reversion trading, e.g., trading a rally in a bear market, remains higher risk and lower probability even for the most experienced traders and investors. DISCLAIMER: This post contains commentary published solely for educational and informational purposes. This post's content (and any content available through links in this post) and its views do not constitute financial advice or an investment or trading recommendation, and they do not account for readers' personal financial circumstances, or their investing or trading objectives, time frame, and risk tolerance. Readers should perform their own due diligence, and consult a qualified / licensed financial adviser or other financial or investment professional before entering any trade, investment or other transaction.
BITSTAMP:BTCUSD
by SquishTrade
9
BTC Weekend Update: Chop Continues Before Next Trend MovePrimary Chart: Fibonacci Channel with Fibonacci Retracements of Entire Summer Rally BRIEF SUMMARY: Price continues to chop above and below the $19,246 retracement level identified in prior posts in recent days. Price action appears to be consolidating before the next trend move—this next downward flush may occur very soon. During this consolidation, trapping price action is occurring where breakouts above and below $19,246 are failing, trapping bulls and bears. More chop could continue until the breakout. The breakout is likely to happen in the coming two weeks —this is confirmed by the Supplementary Chart below, showing that the apex of multiple triangles is very near. But watch for a more volatile whipsaw fakeout move just before the real move in the direction of the trend occurs. A key target zone is the $14,200-$16,200 area where the yellow circle has been placed on the chart above. This yellow circle overlays the teal .23 Fibonacci Channel line. A key Fibonacci retracement level at $16,098 coincides with this target zone . Below this target zone would be $ 13,900-$14,800, a support zone that coincides with 2019 peaks—see the blue rectangle. A horizontal Fibonacci level also coincides with this support zone, with a 1.272 extension at $14,275 running through the center of this support zone. Additionally, one important Fibonacci level of interest lies at $12,000-$12,107 . BITSTAMP:BTCUSD continues to chop above and below the $ 19,246 level at the .786 retracement of the entire summer's rally. Failed breakouts above and below this level have occurred. As of early September 24, 2022, price is holding slightly below this level after a major rout in equity indices in Europe, US and Australia and other countries over the past couple weeks. This .786 Fibonacci retracement was identified on September 12 and 16, 2022, posts, as well as discussed as a level of greater importance in the September 21, 2022 and September 19-20, 2022 updates. On September 19-20, 2022 (Monday), the key levels to watch going into the FOMC presser on September 21, 2022 (Wednesday) were analyzed. Specifically, the charts discussed the "key Fibonacci retracements of the entire summer rally", noting that BTC had been holding near its .786 retracement, at $19,246, of the mid-June to mid-August 2022 rally. The September 19-20, 2022 post stated: "This level lies at $19,246, and price has made a couple attempts to break below it, each of which has failed, suggesting more sideways chop into the FOMC's meeting. In the Primary Chart above, note how price has continued to chop above and below the .786 retracement at $19,246. Each breakout ends up being a trap move. This seems to be the chop zone that will be the base from which the next breakout will lead to the next large trend move down. Price could break soon. The following support and trendline resistance areas suggest a right-angled (descending) triangle. These triangles suggest a breakout direction by the descending angle of the down trendline that composes the upper part of the triangle. Supplementary Chart A: Support Zone and Descending Triangles Further, price action seems to suggest that a break lower could occur at any moment. Before the break, be wary of more chop / whipsaw moves, especially a sharp move higher to trap bulls one last time before the next flush lower. A whipsaw move is not guaranteed, but would be unsurprising given the way BTC has chopped in volatile ways lately. Supplementary Chart B: Key Horizontal Fibonacci Levels and Support Zone Bears, on the other hand, should be prepared for a scenario where the next flush lower could be capitulatory, which may support conditions for a multi-month short-covering bear rally. While this bear rally is a more speculative concept based on the way markets behave after capitulatory lows, it's not unreasonable to consider potential possibilities if a severe flush arises the next few weeks. Traders may enjoy such a rally as well as shorting the next leg down of the bear market in coming months.
by SquishTrade
7