Technically Speaking – August 8, 2022

If you think that the Technically Speaking articles are popping up with increased frequency, you’d be right. And as long as the crypto market continues to push towards critical support and resistance levels, we’ll highlight the technicals in detail. 

Also – if you want to see a bigger image, right-click on the chart images below and select open in a new tab

Shooting Star

 

The chart above is TradingView’s – get ready for the long title – Crypto Total Market Cap Excluding Bitcoin ($BTC.X) and Ethereum ($ETH.X). Or, simply, the Altcoin Market Cap Chart. 

The weekly Altcoin chart shows five consecutive weeks of gains, with an early warning that upside potential may pull back or pause. I want to go over some reasons why. 

The first warning sign is the current weekly candlestick. Yes, I know it’s only Monday, but it’s important to look at it. The thin candlestick body with a wick (sometimes called a shadow or tail) at least twice as long as the body is known as a shooting star pattern.

The shooting star pattern is one of those Japanese candlestick patterns that get candlestick traders as excited as a mosquito in a blood bank. 

The shooting star, if it appears at the top of a swing, is inherently bearish. However, the pattern itself does not provide enough weight to determine whether a reversal will occur. Other criteria are necessary. 

High Volume Node

A look at the Volume Profile (the red and green horizontal bars on the left side of the chart) on the image above shows price is trading right inside a high volume node between $425 billion and $462 billion. So price action hitting resistance in this region is expected and normal. 

And let’s look at one more piece of technical analysis that might warn of a pause in any higher prices – the Composite Index. The Composite Index is a trademarked indicator developed by the greatest living Gann analyst and trader, Connie Brown. In a nutshell, the Composite Index is the RSI with a momentum calculation. It catches divergence that the RSI is unable to do. 

Divergences are differences between an oscillator and the price chart. For example, if a price chart shows lower lows, but the oscillator shows higher lows, that is a divergence. Divergences are a kind of ‘warning’ system to traders and analysts that lets them know something isn’t quite right. 

Divergences are often split into two primary types: regular and hidden. Regular divergences warn of a potential change in trend or a strong corrective move. Hidden divergences warn of a continuation of the prior trend. 

Hidden Bearish Divergence

The image above shows a divergence known as Hidden Bearish Divergence. Hidden Bearish Divergence occurs when price makes lower highs, but the oscillator shows equal or higher highs – a condition currently true on the Altcoin Market Cap chart. 

It’s only Monday, and there’s plenty of the week left. If this were Friday, Saturday, or Sunday, it would be a major warning sign that a continuation to the downside is highly probable. 

The critical level analysts watch for the week is the $462 billion value area. The Altcoin Market Cap must close at or above $462 billion to put it above the high volume node in the Volume Profile to sustain further upside momentum. Failure to do so could see bears pile in at the end of the week, trapping a significant amount of bulls in the process. 

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