Total Crypto Market Chart Analysis
An aggregate view of the entire market’s performance on one chart creates a great opportunity to get a broad view of the entire market.
Bullish Continuation Pattern
TradingView recently created probably the only total cryptocurrency market capitalization data feeds available. The chart above encompasses all cryptocurrencies from all exchanges that TradingView pulls data from. The highlighted section in light green represents a parallel channel. That particular pattern is a very common and very powerful continuation pattern known as a Bull Flag. One of the most common types of pullback/throwback patterns is known as Flags or Pennants. Flags are rectangular in their shape and can trade flat or slightly up or down. Pennants form triangles and can be symmetrical or either of the ascending or descending triangles. Flags have a much higher probability of being continuation patterns than Pennants. And on the current daily chart for the cryptocurrency market cap, there is an extremely bullish setup here.
The current daily candlestick is at the top of the channel/bull flag. Now, while this generally means that a pullback or a range can continue, it is important to use other tools to help forecast and predict if a breakout from the bull flag will occur – or if prices will continue to trade sideways. There are two indicators below that can help with this analysis. The first is the RSI (Relative Strength Index). The second is the Composite Index. While the two indicators do look very similar (and they are), there is one difference. Constance Brown created the Composite Index. Without going into to much detail, I think it’s easier to view these two oscillators this way: think of the RSI as Windows 3.0 and the Composite Index as Windows 10. The Composite Index has a momentum calculation within it that can detect divergences that the RSI is unable to. Finding divergences between the Composite Index and the RSI is a great way to identify a great trading opportunity.
For the chart above, we could predict a big move soon. The RSI is just coming off a support level at level 50 and is sloping higher. What is probably most important about the RSI’s level is that it is not in overbought territory (default 70 and higher). The Composite Index is displaying mostly flat conditions. However, the Composite Index is sloping up and it is about to cross over the slower RSI average (yellow moving average). There is a slight divergence between the RSI and the Composite Index. The divergence that is present is a regular bullish divergence. Regular bullish divergence is only applicable or relevant when there has already been an uptrend or near the end of a downtrend. The cryptocurrency market has been in a bull trend since the beginning of 2019. You can identify regular bullish divergence when the RSI is making lower lows and the Composite index is making higher lows. The divergence is slight, but nonetheless, it is present. And the fact that this divergence is occurring at the top of a breakout level and the oscillators are not in an overbought condition means that the impending breakout should be strong and sustained.