08/09/2018/10:50CET
TA is complex. It is easy to misunderstand signs or miss them all together.
Since the drops of the last days, I studied the charts and analysis of other chartists and found a convincing TA point that I want to share with you.
First a little update.
#BTC is trading at 6475 usd and seems to be loitering just under the 6500 round price for the last 48 hours or so.
The bearish sentiment after our plunge has dissipated and buyers are wading back in to By The Dip.
In fact we may have had a peak as to what coins may rejoin the next rally breakout, to better position ourselves now for the next rise. For me Monero is one that sticks out.
I am holding stop losses on all my significant holdings.
So here is our current daily chart of BTCUSD on Bitfinex.
I would like to lay over this chart an analysis that I think has some weight as to why cryptos plunged.
I will use an indicator I sometimes use, but did not use over the last weeks (to my chargrin) the Fibonacci retracements.
Once you apply this indicator to the last correction starting in the last week of July and ending about 3 weeks later, you will find that the 61.8% retracement level stands at 7495usd. This is very close to the local high of 7429usd on 2nd Sept.
In fact we see a stall in the rally on the next day. A doji candle is formed, a portender of reversal. Then on the 4th we had another push upwards with a higher daily close but the high of the day did not reach the 7429usd of 2 days prior.
Then on the 5th the plunge!
We did not reach the absolute levels the fib retracement indicated of 7495usd but these things are not an exact science.
Sellers that were watching this probably thought to take some profits from this rally and triggered a whale to pull the plug maybe? This we will always only be able to hypothesis about.
Watching the shorts on the BTCUSD Bitfinex shorts was showing some interesting behaviour around the time of this plunge as well even though not a direct correlation.
Result
The result of this is that we have learned through painful experience another lesson in TA and trading.
Resistance should also be considered in the fib retracements. Though in the larger picture, we may be able to find resistance levels from a myriad of indicators and still miss the significance of each one in relation to the other.
All we can say is that other human and android traders are looking at these indicators and also making trade decisions.
We can never get all moves in the market right, all we hope for is to have an edge. If just slightly more than 50% of our quantitative trades win, we are ahead in the long run. This is the most we can hope for.