Cryptos driving extremes in the oscillators do not mean extremes in price
– If the cryptocurrency market sees a corrective move, it has to be a swift and violent move south.
– A quick, almost lightning-fast move is necessary to create the conditions for a continuation of the bull market.
– Today’s analysis will review the conditions and some possible price levels that should be looked out for in the future for the selected cryptocurrencies.
Polka dots (DOTUSD)
Above: Polkadot (DOTUSD)
Polkadot has had a fantastic run in the past 45+ days of trading. It is up more than 100% from its July 20 low of $ 10.35. But all bull moves have bearish corrections – and we will likely see a correction here very soon. It may not be popular to say this, but quick flash crash moves are good in bull markets. Why? Because they are fast. Lengthy sell-offs indicate impending bear markets – the arrows on the chart indicate two different areas. First, the arrow on the candlestick chart points to a zone of confluence in the $ 18.50 area. $ 18.50 is roughly where the top of the cloud (Senkou Span B) and VPOC 2021 exist, so this is a great level of support. Ideally, Polkadot would go in that direction quickly – over no more than seven days. Why? That brings us to the blue arrow on the composite index.
Generally, when trends are corrected, the oscillator movements are greatly exaggerated relative to the price movement. In other words, it creates hidden divergences that create the conditions and red flags necessary to re-enter in the direction of the previous trend. For example, let’s say Polkadot can move into the $ 18.50 area on the candlestick chart in less than a week. If so, the composite index is likely trading near the end of the arrow, making the composite index equal to or slightly below the July 20th low. This means that the candlestick chart will have a higher low while the composite index (and likely the RSI) will have a lower low. That would lead to a hidden bullish divergence. If you’ve been hiding a bullish divergence against a strong support level, you have an excellent opportunity to take a low risk entry to resume the trend.
Above: ChainLink (LINKUSD)
ChainLink has a very similar, almost identical chart setup to Polkadot. The main technical condition on ChainLink’s chart is the location of the 2021 VPOC. For ChainLink, the 2021 VPOC is just below the candlestick on Tuesday (August 24th) at $ 25.77. If ChainLink sees a closing price below the VPOC, ChainLink can have a significant, very rapid decline at the end of the blue arrow at $ 20.50. $ 20.50 is a normal psychological price level and its support structure is enhanced by Senkou Span B and the 38.2% Fibonacci retracement. Depending on how deep ChainLink can move, we should expect the low to be set around August 29th. The Kumo Twist takes place on August 29th and is often a reversal area for any trending market.
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