Bitcoin (BTC) Weekly Bullish Divergence (November 26th, 2019)
Bullish divergence between two key oscillators can predict a future countertrend move.
Bitcoin’s (BTC) Weekly Chart
The chart above shows evidence of some significant changes ahead occurring for Bitcoin – and I’m leaning on the bullish interpretation of that change just ever so slightly. One thing that this chart does highlight is the significant difference between the RSI (Relative Strength Index) and Connie Brown’s Composite Index. If we were to detect for divergences between the RSI and the weekly price action chart, we would not see any. The RSI has been printed lower lows along with Bitcoin’s price action. However, if we were to compare the RSI against the Composite Index or price action against the Composite Index, we would see the divergence. Notice how both price and the RSI are printing lower lows but the Composite Index has printed a higher low. Two other conditions may indicate a future and abrupt move higher.
One of the signals that can generate an entry with the Composite Index is when the Composite Index line crosses one of its averages. If it crosses above the fast average (green line), then this is a strong signal for a buy entry. Additionally, the %B oscillator has a classic ‘hockey stick’ pattern – a condition where the line abruptly turns in the opposite direction. The slope of the %B line indicates a strong rejection lower on the current weekly candlestick. If the %B line can cross back above the 0.2 level, then we would see another positive reversal from the 5-month long corrective move. I believe that for me to be 100% convinced that we are going to reverse to the bull side of this market, we need to see the following conditions all be met:
- Weekly volume must be above the 30-period average or above the prior week’s volume.
- The Composite Index must cross above its fast average (green line).
- %B must cross back above the 0.2 level.
- Price must retrace at more than 50% of last week’s sell-off.
I also want to note the presence of the price and time square up ahead. The red horizontal line at $6967.25 is the 6/8th inner harmonic between the 2/8th Major Harmonic at 5041.75 and the 3/8th Major Harmonic at 7562.13. The 6/8th inner harmonic is a natural reversal pivot – the most potent reversal and rejection price level between now and the 4/8th inner harmonic at 6343.51. Intersecting that horizontal price level is the 6/8th-time pivot (red vertical line). This time pivot shows up starting next week. The time pivot behaves as a source of resistance in time to the trend in force. What I mean by that this: Any instrument that is currently trending when the 6/8th time pivot is reached has an extremely high probability of terminating that trend. The fact that we have a shared 6/8th harmonic series in both time and price creates one of the most powerful reversal conditions on Bitcoin’s chart that we have seen in all of 2019. In fact, no since Bitcoin breached the 2/8th Major Harmonic on the 4/8th-time pivot back in the week of April 8th, 2019, did we see such a powerful price action move from a shared time and price area. I am expecting a significant step the closer we get to the open of next week’s candlestick.