BTCUSD 1D - Heikin Ashi, Bollinger Bands, CCIOBV & Chaikin
This is a 1D BTCUSD chart (BitStamp) using Heikin Ashi candlesticks, Bollinger Bands, EMA (9, 15, 21, 55), a custom CCIOBV indicator and a CMF indicator. Reviewing 1 month.
Heikin Ashi is another Japanese candlestick pattern and HA actually means ‘average’ in Japanese. It does just that, averaging out price movements using a weighted calculation I won’t cover here (refer to Investopedia - investopedia.com/trading/heikin-ashi-better-candlestick/). Effectively what you need to understand is that it smoothes out price action by reducing noise and making key trends easier to identify. This is great for trend traders, not so great for day traders that rely on volatility and short term price action.
Over the last month, we have seen 20 red candles and 10 green, the most bullish month in a while. Price action has consolidated after the large move down in November, oscillating around 1,000k over the month and clearly consolidating around the 4000 S&R area over the last week. The most recent price action over Xmas to New Years has been bearish to neutral, which trading volume down as most are away from their screens.
Bollinger Bands, the three blue bands that ‘wrap’ around the BTC price, were developed by a guy called Bollinger. The top and bottom blue lines are simple 2 SMA away from the current price, while the line in the centre is the average of the two. The great things about this indicator is that we know, 90% of the price action will occur within these bands. And generally, if the price is at the top/bottom 20% of a band we are likely to see some price action towards the middle of that band in the near future. This is based on the simple concept that price’s oscillate around an equilibrium.
Since the violent bearish price action in November the BB have gradually contracted. This reflects the tightening range of the price action over the last month of about 1k only. Note that the BB were much tighter, or contracted in November, then they are now so we could see this market consolidate more over the next few weeks before another breakout. This is probably the most valuable concept behind BB, called the squeeze, is basically the idea that as price bands tighten, they will eventually pop with price breaking out. At this price level a hedge, either up or down, is worth placing.
Volume is one of the most reliable indicators but it is important that you understand how much wash trading is happening on most exchanges and choose to trade only on reliable exchanges (read this for more information - blockchaintransparency.org/trading-advisory-list). The volume has declined since the 20th of December, diverging from the price action overall, and heading to levels not seen since early November (the last dump…) This is a very bearish signal IMHO, even after seasonal (Xmas etc) and factored in. Remember that weak volume goes hand in hand with weak trending (price consolidation and sideways action). For how long before another breakout is the question? IMHO Volume this low tends to indicate that it can’t be long and it the breakout could be bearish .
The CCIOBV is a custom indicator by Lazy Bear (you can get it here - tradingview.com/script/D8ld7sgR-Indicator-CCI-coded-OBV/). It combines two oscillators, the CCI (Commodity Channel Index) and OBV (On Balance Volume) and it’s complex to explain but it provides very interesting information. By simply colour coding the indicators, it is easy to read this indicator. Green for bullish, red for bearish and the Signal indicator is orange. Basically if the CCIOBV is green and above the orange Signal indicator, we are in a bullish trend.
The CCIOBV key changes from red to green, vice versa, can clearly be seen by the vertical lines I have added to the chart. If I simply traded based on this indicator alone I would be a successful trader but simply buying and selling the day after the indicator changes colour and by looking at it’s relative position to the Signal line. It turned bearish on the 2nd of December and flipped bullish on the 16th, then tracked it all the way to 24th of December when it flipped bearish again until the end of the month. If you do just swing trade over several day periods, this indicator alone would make you money. Although it is bullish now, as it is sitting on the Signal line, it is not a low risk trade because the market is going sideways and we are approaching a possible breakout point. Without hedging it would be a risky trend trade IMHO.
The Chaikin Oscillator (investopedia.com/terms/c/chaikinoscillator.asp) is my final indicator, something I am testing at the moment but still not 100% confident with. Chaikin Oscillator is an indicator of the MACD, which is an indicator of the EMA, which is an indicator of the MA, which is an indicator of price action. I won’t get into the details of how it is calculated, but will try and describe what it tries to tell us. Technical analysts believe that the balance between buyers and sellers is what drives the markets. TA use indicators to measure the balance between buyers and sellers, including accumulation/distribution indicators like the Chaikin Oscillator. When the CO crosses the zero line, that is bullish buy action, and vice versa. Standard settings are 3 and 10 day EMAs, can make the indicator less responsive with 21 and 15, for example.
The CO remained in negative territory until the 19th of December, when it switched positive. The indicator was lagging significantly compared with other indicators, but it does provide further confirmation of a change in volume. What is interesting to see since the 20th is a tightening of the CO around the zero line, indicating neither positive or negative. This sideways action may preclude a major price move.
Overall I am neutral to longer term bearish. Although we have seen some bullish candlestick action, the follow through has not been strong and volume has been declining for the last week of the month. The CCIOBV offers no clear trend, although it is short term bullish. While the Chaikin Oscillator is sitting around the zero line, we see no strong bullish volume. The longer this goes on, the more bearish I will get.
Heikin Ashi is another Japanese candlestick pattern and HA actually means ‘average’ in Japanese. It does just that, averaging out price movements using a weighted calculation I won’t cover here (refer to Investopedia - investopedia.com/trading/heikin-ashi-better-candlestick/). Effectively what you need to understand is that it smoothes out price action by reducing noise and making key trends easier to identify. This is great for trend traders, not so great for day traders that rely on volatility and short term price action.
Over the last month, we have seen 20 red candles and 10 green, the most bullish month in a while. Price action has consolidated after the large move down in November, oscillating around 1,000k over the month and clearly consolidating around the 4000 S&R area over the last week. The most recent price action over Xmas to New Years has been bearish to neutral, which trading volume down as most are away from their screens.
Bollinger Bands, the three blue bands that ‘wrap’ around the BTC price, were developed by a guy called Bollinger. The top and bottom blue lines are simple 2 SMA away from the current price, while the line in the centre is the average of the two. The great things about this indicator is that we know, 90% of the price action will occur within these bands. And generally, if the price is at the top/bottom 20% of a band we are likely to see some price action towards the middle of that band in the near future. This is based on the simple concept that price’s oscillate around an equilibrium.
Since the violent bearish price action in November the BB have gradually contracted. This reflects the tightening range of the price action over the last month of about 1k only. Note that the BB were much tighter, or contracted in November, then they are now so we could see this market consolidate more over the next few weeks before another breakout. This is probably the most valuable concept behind BB, called the squeeze, is basically the idea that as price bands tighten, they will eventually pop with price breaking out. At this price level a hedge, either up or down, is worth placing.
Volume is one of the most reliable indicators but it is important that you understand how much wash trading is happening on most exchanges and choose to trade only on reliable exchanges (read this for more information - blockchaintransparency.org/trading-advisory-list). The volume has declined since the 20th of December, diverging from the price action overall, and heading to levels not seen since early November (the last dump…) This is a very bearish signal IMHO, even after seasonal (Xmas etc) and factored in. Remember that weak volume goes hand in hand with weak trending (price consolidation and sideways action). For how long before another breakout is the question? IMHO Volume this low tends to indicate that it can’t be long and it the breakout could be bearish .
The CCIOBV is a custom indicator by Lazy Bear (you can get it here - tradingview.com/script/D8ld7sgR-Indicator-CCI-coded-OBV/). It combines two oscillators, the CCI (Commodity Channel Index) and OBV (On Balance Volume) and it’s complex to explain but it provides very interesting information. By simply colour coding the indicators, it is easy to read this indicator. Green for bullish, red for bearish and the Signal indicator is orange. Basically if the CCIOBV is green and above the orange Signal indicator, we are in a bullish trend.
The CCIOBV key changes from red to green, vice versa, can clearly be seen by the vertical lines I have added to the chart. If I simply traded based on this indicator alone I would be a successful trader but simply buying and selling the day after the indicator changes colour and by looking at it’s relative position to the Signal line. It turned bearish on the 2nd of December and flipped bullish on the 16th, then tracked it all the way to 24th of December when it flipped bearish again until the end of the month. If you do just swing trade over several day periods, this indicator alone would make you money. Although it is bullish now, as it is sitting on the Signal line, it is not a low risk trade because the market is going sideways and we are approaching a possible breakout point. Without hedging it would be a risky trend trade IMHO.
The Chaikin Oscillator (investopedia.com/terms/c/chaikinoscillator.asp) is my final indicator, something I am testing at the moment but still not 100% confident with. Chaikin Oscillator is an indicator of the MACD, which is an indicator of the EMA, which is an indicator of the MA, which is an indicator of price action. I won’t get into the details of how it is calculated, but will try and describe what it tries to tell us. Technical analysts believe that the balance between buyers and sellers is what drives the markets. TA use indicators to measure the balance between buyers and sellers, including accumulation/distribution indicators like the Chaikin Oscillator. When the CO crosses the zero line, that is bullish buy action, and vice versa. Standard settings are 3 and 10 day EMAs, can make the indicator less responsive with 21 and 15, for example.
The CO remained in negative territory until the 19th of December, when it switched positive. The indicator was lagging significantly compared with other indicators, but it does provide further confirmation of a change in volume. What is interesting to see since the 20th is a tightening of the CO around the zero line, indicating neither positive or negative. This sideways action may preclude a major price move.
Overall I am neutral to longer term bearish. Although we have seen some bullish candlestick action, the follow through has not been strong and volume has been declining for the last week of the month. The CCIOBV offers no clear trend, although it is short term bullish. While the Chaikin Oscillator is sitting around the zero line, we see no strong bullish volume. The longer this goes on, the more bearish I will get.
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