I got bull-trapped in IQ around August and after that I placed it on my "check once a month list" and so I missed the last 4 weeks of gains. I also heard about China moving to improve its liquidity problem and for some reason I didn’t start reading into that until just now. Normally I would be worried about FOMO’ing at the top but this clearly just started to move.
Fundamentally IQ got hit with the global quantitative tightening beatdown. With liquidity down internationally all bubble-stocks (FANG, Other tech stocks, real estate, crypto, etc) started popping. My linked post go over how QT has messed with both traditional markets and crypto so give those a read. First some news about China and liquidity (bloomberg.com/news/articles/2019-01-03/china-easing-expected-as-625-billion-liquidity-hole-opens-up)
China will cut the reserve requirement ratio and improve funding conditions this month, as liquidity tightens toward the Spring Festival holidays, the country’s largest securities firm says. Fresh demand for funds will amount to nearly 4.3 trillion yuan ($625 billion) in January, according to Citic Securities Co. and Bloomberg calculations. Mainland residents will withdraw 1 trillion yuan of cash in preparation for the holiday, when money is gifted in red envelopes. Corporate tax payments and maturities of lenders’ interbank debt will also mop up liquidity, prompting authorities to step up cash injections.
I don’t give a damn about red envelopes and holidays, I care about 625B inflating the money supply and IQ, which has responded fantastically. On the main chart we see that the price action created a C clamp on the cloud and that is performed well enough to get us a bullish T-K cross. That price action basically teleported the price action into the cloud once the point of control was breached on the volume profile. I expect a lot of action between the 0.382 and .0618) retracement levels (between $26 and 34 as we have two high volume nodes there. We might also test the POC one more time before a truer takeoff.
The short history and exponential growth make doing standard TA with the RSI and stochastics rather difficult as we cannot look for divergences on the 3d or weekly timeframe (and forget monthly) to see if one of these massive uptrends or bottoms is divergent or not. The MACD does help us identify a technical triple bottom and the ATR is at a yearly low so we can expect any movement to be very impulsive. Since we are out of room to impulse down that means we impulse up. Higher period moving averages are worthless at this point but we do have a bullish cross incoming on the 20 and 50. Digging down into the 4h chart we see the 20-50 MA cross was all we needed for a fantastic upswing and the 20 was tested as support once and then we blasted off. The chart below really isn’t helping my FOMO.
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Topping behavior on this uptrend with the RSI having classic bearish divergence. Arrows show HVNs where I personally want to buy in. We hit those targets and we are on our way to developing a inverted head and shoulders. We go below that and we are looking at some sort of double bottom.
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Beginning to look like we have a clear Elliot Wave pattern on the way up and so we just need to wait for an ABC correction to find our low. I am liking the internal consistency between the fib levels created from the high and I suspect the price action stay within the wick of our most recent high as we have more topping behavior. The bearish divergence confirms wave 5 and my update a few days ago shows the hidden bearish divergence. With both hidden and classic bearish divergence we should be going down soon.
I am going to be watching the .618 retracement/Point of Control of the upswing as my entry.
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The MAs and volume look really good for a buy and forget entry at market prices. THere looks to be very little probablity of much more downside.
The formation looks to be a falling wedge pennant which traditionally don't have that great of a performance but this one is clearly got some bullish divergence to help it on its way. As I mentioned in my first IQ post I am fundamentally long IQ for a really long time at this point and this is a great technical entry. There still remains the factors of the wedge not or underperforming but those risks remain no matter what.
Hi, thanks for our technical analysis and charts. On your final / most recent comment - I don't follow what you mean by "I am going to be watching the .618 retracement/Point of Control of the upswing as my entry". Do you see a large pullback to 16.70 61.80% fib level)? Thanks
This_Guhy
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@mxbe, I do see a larger pullback as being possible for a couple reasons. First, the VPVR justifies it, secondly it creates a bullish reversal pattern with a inverse head and shoulders, and third, we have found this area as an important area of support in the past (the rectangle) and finally IQ retraced beyond the 0.618 before blasting off the last time. When the price action approaches the 0.618 level I am going to be looking for hidden bullish divergence on the RSI and MACD and the higher the timeframe, the better.
I did an Elliot wave count for my update yesterday and if you mentally put a ABC correction after peak 5 the typical low is going to be within the the Wave 4 Low, and there is a lot of VPVR support and a fib ratio there($19.19 0.236) If it turns out I am being too ambitious with my entry goal and potential Inverse head and shoulders and I see an abc correction play with point C displaying bullish divergence I'll adjust my expectations and trade a breakout looking for another elliot wave 1-5. I try and trade as much as I can these days in accordance with Bulokowski's tips and I will be following his guidance on ABC corrections here: thepatternsite.com/abc.html