Long Term Update: No more Tesla.

“…..on the daily chart where there is strong support but again it is a question of which timeframe will prevail and at the moment I would bet on the weekly chart, nonetheless there might be a minor rebounce from here….”

Last Update April 23, ’21

The minor rebound happened, market remained sideways around the daily average and came back down because of an accident (a tesla went off the road)
Let’s broaden the view with a weekly chart.

BTCUSD Weekly Chart – Below Kama Efficiency Ratio

Everything that has been happening since February 2021 which is the the slowdown of the trend on the weekly chart was expected and is the result of a careful observation of the volatility / trend ratio, two elements that characterize the average that I use (Kama)
I expect a further slowdown of the trend until mid-June when Bitcoin will be completely flat, from there on a new trend will emerge on the weekly chart; the future of bitcoin will be decided there should this new incoming trend be positive or negative (i guess positive).
A good idea could be to buy in the next week if bitcoin will test the weekly support zone in the 36,000-42,000 $ price zone, this market is lateral therefore I expect that it will not fall under 36000 dollars.

I think in July, I hypothesize, some liquidity may return to bitcoin from altcoins, also because the bitcoin market share chart (BTC.D on tradingview) has a nice spike in the kama efficiency ratio on the weekly chart (bottom might be near).
If a new trend is expected on the weekly chart for July let’s say, who could fuel this new trend? A return of liquidity from altcoins to bitcoin itself.

As usual if you have any doubts leave a comment, it is well appreciated.

Long Term Update: Weekly average broken down!

I left you on March 31 saying that bitcoin would probably go up with less intensity, that’s what it did by making a new top around Coinbase’s Nasdaq listing event.
It can happen that such events that catalyze the attention of the entire community can mark what I call “buying climax” remember that the main feature of such an event is when you run out of demand around a highly anticipated news or event like the Coinbase listing.
The situation on the weekly chart has remained unchanged, I’ve been telling you for two months that the Kama efficiency ratio is high and needs to go down and that’s what it keeps doing, today we got to about 0.59 and I think it will continue to go down until the next sideways phase.
This sideways phase should take place between 30K and 40K usd as shown in the chart below but my bet is that 40k usd support will work.

BTCUSD – Weekly Chart

As I told you, the kama efficiency ratio is going down but it’s going to take weeks to get below the 0.30 threshold,so it will presumably take a while before bitcoin will resume the uptrend.
I conclude by commenting on the daily chart where there is strong support but again it is a question of which timeframe will prevail and at the moment I would bet on the weekly chart, nonetheless there might be a minor rebounce from here.

BTCUSD daily chart

Short Term Update: again at critical key point

I concluded the previous update saying that it would be critical to see whether or not bitcoin would break through the monthly Kama moving average (51.000$ at that time).
I waited a bit to see the extent of the positive reaction from the value this weekly average had that day, again 51k usd. Exactly like in the previous update bitcoin is again, but this time on the daily chart, on a key point. The price level around 59-60 thousand usd were bitcoin failed to exceed between March 18 and 20 is this new key point and a failure to go above it would probably lead to higher risk to see this thing going below my weekly average.
Let’s be clear, we need to start seeing on the daily chart a sequence of rising highs and lows otherwise there is always an increasing risk that the bearish scenario hypothesized in the previous update comes true.
About this weekly average I note that since this strong trend started bitcoin has never spent too much time below it as you can see in the below chart.

BTCUSD Weekly Chart – Kama Average and Price Bands

What will happen? Bitcoin is probably going to continue to go up at a lower rate because as I’ve said many times since January the weekly kama efficiency ratio has to go down and it’s going down. Today we are at 0.70 from a high of 0.85 that bitcoin reached on the first Top of January and on the second one of February, I remind everyone that this value represents the ratio between volatility and directionality and varies from zero to one. You can see by yourself that after February we are going up with less intensity.

The strategy about my ongoing long term trade does not change, I continue to leave the trailing profit at $29,000.
It will be interesting for me to see if in the next few days bitcoin can make a new high above $60k.

Take care and see you at the next update.

Why this Drop?

I was saying in the last update that a bottom on the Kama average (daily chart) is a high and strong bottom, which suggests new highs coming.
This is not happened and usually, I emphasize usually, if after a relatively high bottom we do not have a new top what happens is that it may develop a sustained decline and is exactly what has happened in recent days.

This behaviour in my opinion can be explained by the situation on the weekly chart that i already pointed out in the long term update of last January 19, 2021.

In the chart below you can see that once arrived around 0.85 the kama efficiency ratio has begun to decline slightly, the consequence on the graph is a slowdown of the weekly trend in progress.
I do not think that the consolidation phase of the Kama ER (eff.ratio) is over, therefore the risk is that the lower part of the bullish channel might be tested, with the first support at 37 thousand dollars and the next at around 29 thousand dollars.
This risk of a drop exists and could materialize in the coming weeks, therefore the operating strategy requires a change, the stop loss that I once suggested at $35,000 could be too close and should be moved below $29,000 to remain protected from the volatility of this market. You don’t want to get caught by the market at the bottom and then see the train leave without you on board:)
Stay alert and lucid because a good buying opportunity could be coming, between $29K and $37K. It’s crucial to see if these days BTCUSD will stay or not above weekly kama at 51,000$

BTCUSD Weekly Chart

Short Term Update: Bullish development

Since the last update bitcoin was flat and below the daily Kama average, it managed to break to the upside and what happened in the last 10 days is a positive development.
We don’t have a confirmed upward trend yet but we are almost there, the efficiency rate of the Kama average is at 0.30 on the limit value that separates the “flat mode” from the “trend mode”.

BTCUSD Daily Chart

I don’t think we’re going down to the support zone between $43k and $47k, I think we’re going to go into the new resistance zone with a resistance level around $67k.
For those who want to follow the trend can use the hourly chart as reference for entries, right now the bitcoin is trying to force the resistance at $58000.

BTCUSD Hourly Chart

I usually don’t use the hourly chart with this indicator, it would be necessary to look for settings that are good for intraday charts but this time it looks good, that resistance zone is working and a breakout would imply a confirmation of the daily bullish trend.

Short Termp Update: Again Flat, “Ad infinitum”

Because of cyclicality of the things that surround us also the markets oscillate endlessly between phases of congestion and trend, between moments in which the volatility/trend ratio is almost zero to others in which it is maximum.
By dint of following my updates I hope you will succeeded in understanding this fundamental concept, then you will begin to look at the markets for what they are, balloons that continuously inflate and deflate or alternatively, if you don’t like the metaphor, a breathing lung.

Kama Efficiecny Ratio – 8 Years of BTCUSD Breath

The image above represent the last 8 years of the bitcoin/dollar kama efficiency ratio. As you can see for yourself, when the market peaks immediately the volatility trend ratio drops because the market takes a break, exhaling the previously inspired air.
With BTCUSD there is a strong 60-day cycle in the Kama Efficiency Ratio indicator, it means that , on average, 60 days separate two peaks in this indicator, it does not necessarily mean that there are 60 days between two highs or between two lows, due to the nature of this indicator it can happen that there are 60 days between a low and a high or between two lows or between two highs. I hope to be clear on this concept to avoid confusion but a peak in the Kama Efficiency Ratio does not necessarily mean that there is a top, it can also be a market low.

Can we use this information to try to predict the next spike on the kama efficiency ratio? We can but we must evaluate the results with caution.
The last peak happened on February 21, so the next peak could be around April 20, where we will have either a Top or a Bottom.
For now, as you can see in the chart below, the Kama efficiency Ratio is very low, in fact BTCUSD is flat and between the Kama average and the first line of support, tested 3 times in recent days.

If you got the metaphor, now is the time for the “bitcoin animal” to start with a new “inhale, exhale” cycle, the volatility/trend ratio (Kama E.R.) is very lows soon we will have a new established trend on the daily chart.
In case of a downtrend the next bottom could be inside the support zone, between 39 and 44 thousands dollars; if an uptrend will develop the next target could be towards the resistance area near 65 thousands dollars.

Ok guys, I leave you saying that I moved my stop loss to 35000 dollars, it now has become a stop order to protect the profits achieved so far. See you at the next update.

Short Term Update: Volatility is back

The volatility is back, to be honest I had suspected two days ago that Bitcoin was running out of fuel, even some profit taking evident on the hourly chart had let me think so and then yesterday that volatility peak was the confirmation.
Despite this, at a careful and lucid analysis, the situation on the daily chart has not changed, we are still in trend mode and it is not guaranteed that Bitcoin will go sideways in the next days.
In any case, pay particular attention to the support zone between 39 and 44 thousand dollars, it is very important to stay above 39 thousand dollars in order not to compromise the ongoing bullish trend.

BTCUSD Daily Chart – Kama average and deviation bands | Kama efficiency ratio

The most keen observers will have noticed that after a prolonged bullish trend, the kama efficiency ratio had reached 0.71, which is beginning to be an important value. Personally I see the correction of these two days as absolutely normal and also necessary in order to continue.
I would also add that this market did not go down because of Janet Yellen’s statements, news are always a consequence of market forces and never the cause. I explained in the past, for those who have been following me for some time on the blog, that when a bearish phase starts, the negative news will be amplified and the positive ones ignored, vice versa when a bullish phase starts, the negative news will be ignored and the positive ones will be amplified, but it is never the news in itself that moves the market.

Short Term Update: Back to “Trend Mode”

I waited a while before updating you about the short term situation because i wanted to see if the trend confirmed by the Kama efficiency rate was good and not a false signal.

BTCUSD – Daily Chart View

As I have said many times in the past, when the Kama average is flat there are very good resistance and support zones that define the useful space in which an asset, in this case bitcoin, moves.
Outside of these resistance zones a trend reversal is confirmed (if we break the support zone) or the continuation of the bullish trend (if we break the resistance zone).
What has happened is that bitcoin has broken the resistance zone positioned at 40-44 thousand dollars thus confirming the bullish trend. On the weekly chart the trend is strong and price remains consistently above the weekly Kama average.
Kama efficiency ratio is now in “Trend Mode” on all the main timeframes: Daily, Weekly, Monthly; therefore my outlook is strongly bullish.

Short Term Update: Approaching Resistance Area

The situation has not changed much since the last update, BTCUSD retested the support zone a second time and reacted to the upside.
Now we are entering the resistance zone and the kama efficiency ratio is still below 0.30, flat market.
I would say that I’ll expect some form of resistance between 40 and 44k from sellers in general.
A decisive break above $44k would confirm the continuation of the ongoing bullish trend on the monthly chart.

BTCUSD Daily Chart – Kama average and bands + Kama Efficiency Ratio

A particular attention deserves the situation on the weekly chart, where instead of going down BTCUSD remained flat for 4 weeks, I would interpret this behavior as a signal of strength.
Honestly, looking at the weekly chart, I already see 53-54 thousand dollars as a target for the coming weeks.

OFFTOPIC: A nice example of how to spot a top with Kama Efficiency Ratio

GME Daily Chart – Kama and Kama ER

I wanted to include this example because I think it is very good to understand the potential of the Kama average togheter with deviation bands and its efficiency rate (ER).
Last 28 January after a very volatile day and given the reading of over 0.80 of the kama ER I understood that something was wrong and that the top could have been done. This was confirmed in the following days.
A violent downward movement immediately brings the average kama in a stalemate position that allows us to have reliable deviation bands support/resistance zone.
I expected a correction down to 60 usd, which then happened. It is also not correct to say that the price collapsed from $480 to $60, it just moved within a very wide flat zone.
Now the GME price might even go back up to the Kama average.

Short Term Update: Daily Chart Quick Check!

Since the last daily update bitcoin has gone into “flat mode” (kama efficiency ratio below 0.30), in this mode you can expect the oscillators to work fairly well so that the widespread stochastic oscillator gave you a nice buy signal a few days ago.
I believe that today or tomorrow at the latest bitcoin is going to recover the Kama average at $35,900.
It remains to be seen in which direction the kama efficiency ratio will confirm the next trend on the daily chart considering that the situation on the weekly remains a bit unfavorable to the bullish while the monthly one is not, as I said in the previous long term update of January 19.

BTCUSD Daily Chart – Kama and Kama efficiency ratio, 18 periods.

Long Term Update: Estimating a TOP using Kama Efficiency Ratio

The Efficiency Ratio (from now on ER) was presented by Perry Kaufman in his 1995 book “Smarter Trading” and it is calculated by dividing the price change over a fixed number of bars by the sum of the price movements that occurred to achieve that change.  The resulting ratio ranges between 0 and 1 with higher values representing a more trending market.
The idea here is to measure the value of the ER during an important Bitcoin Top to see if there is a strong coherence between different timeframes.

DateDaily ERWeekly ERMonthly ERAverage of 3
November 30, 20130.700.790.640.71
December 18, 20170.660.740.880.76
January 8 , 20210.620.770.440.61
Multi TimeFrame Kama Efficiency Ratio at Bitcoin Historical Tops

The high of last January 8 does not seem to have a situation on the various timeframes similar to that one of two important Bitcoin top (2013 and 2017), in particular the situation on the monthly timeframe is inconsistent.
On the weekly timeframe instead ER is quite high but I think that in the end the monthly timeframe will prevail. It is always difficult to understand which timeframe dominates over the others but personally I prefer to give precedence to the highest timeframe, in this case the monthly where there is room to rise.
I attach below the weekly chart so you can better visualize the ER situation

Weekly Chart BTCUSD with Kama Efficieny Ratio

And here the monthly chart where you can clearly see there is room for a prolonged trend.

BTCUSD Monthly Chart with 18 periods Kama Efficiency Ratio

Short Term Update: Flat mode or Trend mode?

I always tell you guys that it is very important to evaluate the relationship between trend strength and volatility, it makes us understand if the market is in “trend mode” or “flat mode”, at the moment we are at the limits, the market has reacted from the support shown in the last update but it is not enough.
In order to stay in “trend mode” it is now necessary to make a higher top than the previous one, perhaps around $46,000; any top lower then this would imply that BTCUSD is slowing down and going FLAT.

BTCUSD Daily Chart – Kama deviation bands and efficiency ratio on lower pane

When a security or an asset is in “trend mode” it is strategically optimal to keep the position in the direction of the trend without trying to go against by opening a short positions inside the deviation bands resistance area.
If you really want to go short, enhance the efficiency of your initial stop-loss by pairing it with a trailing stop loss.