Good evening everyone…Typical weekend behavior huh?
Well, tonight’s breakdown is going to bring a few forex pairs. So this one is going to keep you guys occupied.
Some of you may or may not remember me telling you my notes I used to write to Jessie Livermore. The guy died in 1934. So why on earth would I be writing to this guy?
The lessons I learned early on my trading journey was to be accountable, don’t get it twisted, It took some time to understand this, but I once read that I needed to make myself accountable to someone in my chosen career. I needed to journal my experience. So i said to myself, I may aswell do my market updates and write to Jessie Livermore.
I would sit down, pen and paper and write out what I was expecting the market to do. This put me in a state of mind where I had envisioned “what would Jessie say”. So I was sure to be clear with what I expected and the steps I would take during my trading session and how I would maintain discipline.
In retrospect, you could say I was a madman, but I was simply journalling.
This is why these breakdowns are so concise and pull you to think deeper than just vector candles.
This is what I would do every day…
So lets get to it:
Bitcoin 21Hr TIME FRAME –
Very interesting behavior has been happening on this chart. Pay close attention to the volume bars at point 1 – Notice how price is rising up and there is clear indication they want to move away from the lows. Move to point 2 in the volume bars, and we have the same story yet volume is going lower as price is rising (see point 3)
Now if you have looked at box 4 and wondered what the significance of this zone is, would it be rich to assume that we are seeing the same thing developing?
Notice in the box labeled 3 we have a violet vector blue stopping volume and in box 4 we have near enough the same thing.
Marry both volumes at these two points and you can assume that bitcoin is starting to break down from this current price point in the short term.
Notice how price behaved at box 4 shortly after the blue stopping volume candle and they came down and took the violet stopping volume wick.
Now we look at the price and we can see many green vectors down below. So are we gearing towards price coming down soon purely off the logic that we are seeing a reduction in volume, or as the technical traders would say “Divergence”.
See, In my mind I am asking myself, why is bitcoin moving up with no real conviction, how much ground have the green vector candles “really taken” – More so, price is stalling at the 50 EMA yet before in box 4 it was the 13 ema they were stalling at, suggesting moment still favored lower prices.
So what figures? Is there strength in this move-up, if there was what would I need to see? – Simple – Must breach the 50 ema…This is where you must be patient with trading. You are already working with limited information and it is all guessing at best, but you can improve the odds of a trade playing out if you are giving the chart the chance to “show” you the conviction.
We would need to see a vector appearing above the 50 ema to solidify that they are working towards and away from the current zone of consolidation.
Next chart is the 14hr chart. Why the 14hr chart…Go and look for yourself…go down from 21hr and you will see what the chart is showing you…that 50ema is a problem for bitcoin right now.
I noticed something interesting with the grey candles highlighted yellow.
Stay with me here…..
Notice the big white candle that pushes up and fails to take the 50 and hold, next candle after that spikes above and comes down, after that, the grey candle fails to even get above the 50 ema and the last two yellow arrows show both candles failing at getting above the 50 ema and the final yellow arrow closes over 50% into the last white candle that tried to push price up.
What does this mean to me? It tells me that the resistance at this zone is controlled. Market makers are hitting these zones as they are getting interest from retail holding on to hope that bitcoin will sustain itself higher which would lead me to assume that on the lower time frames we can assume that we will see the development of an attempt higher before it comes down but not successfully above the 50 ema. But only a few moments ago I said that a break above the 50 would solidify the move up? True, but we are below the 50 and that is all we know. Until it breaches the 50 then the narrative will switch and trade higher. We are now trying to establish if what bitcoin is doing right now “is” preparing for a move above the 50 or simply getting ready to break down. This is how you come to the logic of working out if the price is going to move in your favor or not. You work with what you have and if it does the opposite then you act accordingly, you know the saying. “Good traders cut their losses, great traders change direction”
NOTE: Considering that we assume that divergence is coming into play, when volume drops off when price is dropping, it is assuming that the seller’s pressure is not there so its another attempt to load up and then break out higher. We are trying to solidify which of the scenarios carries more weight, are they looking to break higher or are they preparing to go lower, and based on what evidence?
11 HOUR TIME FRAME
Now we start getting into the development of the move…
Pay close attention to the yellow arrows. Before you continue reading on, does this zone look like they favor higher prices. Is retail convinced that the price can continue up from here? Where are the bull flags, pennants, and all the magic that is used?
This is what I see….
The 3 yellow arrows are showing me that attempts made by the market to move up were what is called “inducing”. Keeping the commitment by retail to put the money down!
Notice the grey candles. Look how aggressively they are surrounding these candles with the yellow arrows.
Notice the last yellow arrow to the right. Strong open yet couldn’t even get above the previous candle’s wick…The next grey candle spikes higher to make believe retail is right and it’s up we go but then a sharp move back down. They paid the price.
Look at the volume bars below…There are more grey volume bars than white…So who is in control here? or should I say…What are you seeing more off in this zone with conviction?
THE 4HOUR CHART –
Now it starts to get a bit tricky. The smaller the time frame that you work on the more you are exposed to false moves and attempts at specific zones that would lead you to believe one thing is happening when the opposite is happening. Welcome to trading.
Draw your attention to the yellow arrows yet again.
Two spikes to the upside, one gains ground, (Violet vector)
the second is a grey candle that recovers more than 50% of the wick.
Can we assume in the shorter term bitcoin will induce again inside this zone and make a stop run up towards the recovery of these wicks?
What would you need to see? upon closer inspection notice the 5 and 13 emas are flat…So you are waiting for a move…The first attempt away from this zone, you wait for the retrace to solidify that this is not a fake move higher or lower…Once you start seeing the 5 and 13 expanding take that as your direction.
If the price continues to stay below the 4hr 5 and 13 ema then you are increasing the odds of it staying below that zone.
The MM zone of manipulation will be where the speed of candles will appear…Always anticipate that the Mm will try and attack the lows when the narrative is price is trying to come away from the lows. It is in this zone that the MM will reveal their intention if they decide to come back up. Expect V shape plays to appear inside of this area.
Now…What do we mean by the “Consolidation Level Zone”
If by the principle of the cycles, we are forming what would appear to be a level on consolidation. The long bitcoin stays between 16435 which is the low of the green vector candle on the 4hr and 17325 (violet vector wick high) We assume that this is where the MM is preparing to mark the price up…WHY…because you will start to see many red vectors that are failing to break lower, creating the illusion of short traders to step in to only get shaken out.
The 200 ema above is the only significant point in the chart if bitcoin can hold the 50 ema on the 4hr.
So…if you have read the above so far…sweet.
Now my conviction:
Do I believe bitcoin can go up? Yes I do…But I have to scrutinize the idea of why it cant before I decide to go with the story of price moving higher.
The ideal scenario would be for you to wait till Monday open…That way you are improving the chance of movement with your trade as opposed to grabbing a few little moves on the weekend.
We have barely any news announcements on Monday and throughout the week.
All bitcoin needs to do is stay ini the zone above (Consolidation level) The longer it stays in this zone from now till monday, the greater chance we have bitcoin going up.
Remember the fast they move up, the greater chance it will come back down. The fast they move lower, the greater the chance it comes back up. Decide what time frame you are going to trade.
If by the principle of the santa rally….Then it will be the last 5 days of December that price will start this run-up. So would it be logical that bitcoin will come down first before it goes up?
It is all based on the 50 ema on the time frames we have discussed. You will be more confident knowing that if they break above the 50 emas that we have discussed above across all those time frames, you are improving the chances of longs paying out…But failing that, you are getting more conviction that they are to work back those green vectors.
EURUSD 15M TIME FRAME –
Eurusd has been showing some interesting behavior and continuing its move to the upside.
I started the cycle drawing from the low point as usually when you see these aggressive red vectors appearing as price is moving up it is their attempt at picking up more longs at lower prices.
Notice how i have drawn the cycle on the 15m time frame…
Its clearer than the 1hr time frame. This is what you need to do when the cycles do not appear to be clear on euro.
Now Euro has achieved 2 x ADR so on average it moves a specific amount of pips “115” so it has achieved this twice and we have room for one more attempt up which will take us towards the 1.06351 zones where i would expect a peak formation to be created.
Notice the 2 boxed area in euro. See that big red vector candle? price comes all the way back up?
Where did you see that? Look at the W formation (red vectors pushing price down) and then in the level 1 zone box.
I believe this should keep you guys busy over the weekend.
What can you learn from this?
The breaking down of the candles.
This is the practice you want to focus on. whether i am right or wrong, it can only do one of two things and we are waiting for proof that we are right about bitcoin going up until we are shown otherwise.