Weekly bullish divergence just painted, going back to February 5th
There is some clear evidence of an immediate bottom being formed this week. The last paragraph of this article will provide more detail, but there is a big amount of reversal signals being painted on these charts on multiple timeframes.
One of the great technical analysts, Thomas N. Bulkowski, wrote a fantastic book Encyclopedia of Chart Patterns where he performs detailed analysis on many patterns in the market and provides a ranking system as well as detailed information on how to identify the confirmation of a pattern or the volume that should be associated with it. For the regular Head-And-Shoulders pattern, Bulkowski rated it as one of the most profitable patterns. The ‘cousin’ of the regular Head-And-Shoulders pattern is the Inverse Head-And-Shoulders pattern. According to his site, the Inverse Head-And-Shoulder is only valid once the neckline is broken. He also indicates that throwbacks (also known as pullbacks) happen 64% of the time. That exact type of pattern is seen right now on the hourly chart for Bitcoin. At the time of writing this article (1818 CST), price had actually broken out above the neckline and closed above the neckline. Given that a throwback/pullback happens 64% of the time, we should expect to see price test that neckline and perhaps even retrace back inside the right shoulder.
Bullish Divergence on Daily Chart
Another bullish signal being generated on Bitcoin’s chart is the regular bullish divergence between the Composite index and both the RSI and price. Both price and the RSI have generated a series of lower lows, with the RSI printing a value below 10. It should be noted that this level on the RSI is the lowest in Bitcoin’s daily chart price history. Contrary to both the RSI and price, the Composite Index has printed higher lows, showing that momentum is moving towards higher volume and higher prices. Price is sitting just below a key 45-degree angle on the current Gann square. What is very interesting and very important about this zone is that the 2/8th Major Harmonic at 5041 has failed to initiate a response pivot and reversal – indicating the price move lower is significantly overdone and not ‘honest’. Additionally, November 19th is the 6/8th time pivot in the current Law of Vibration cycle. Both the Major Harmonic price level and the 6/8th time pivot create a square in price and time.
If we look at the current weekly chart and observe the present levels on the RSI, price and the Composite Index, there is a very interesting development. Just as with the daily chart, the weekly shows regular bullish divergence between the Composite Index, price and the RSI. Again, both the RSI and price are showing low lows but the composite index is showing higher lows. This is, frankly, a big deal. Especially when we observe the length of time it has taken for this divergence to appear. This divergence extends from the low of the week of February 5th, 2018 to the present week of November 19th. Considerable bias should be towards a violent reversal from this most recent down drive.