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12/07/2021 |

$BTC Weekly Case Study: Negative Divergence, Seasonality, and Anchored VWAP

Using a mix of technical indicators as well as non-technical indicators can help market participants get an edge in the markets. In this particular case study, we go over the different ways to use technical indicators such as using negative divergence, seasonality, as well as anchored VWAPs on TrendSpider.

Bitcoin Monthly Chart

$BTC chart.

This is a monthly chart of Bitcoin over the last 18 months. In this chart, we look at different technical tools on the TrendSpider platform to get an idea of technical levels to watch moving forward as well as signals from indicators that may suggest a reversal and have in the past. These tools range from oscillators such as the Williams % Range to the anchored VWAP on the technical side of things and monthly seasonality on the non-technical side of things.  

  1. This number shows the Covid low from March 2020 which was a very important reversal point in the crypto markets but also across all financial markets. This was when the market “reset” after panic ensued from the start of the Covid Pandemic. The March 2020 candle is where we want to start the anchored VWAP but also apply new VWAPs to candles that have tested the original. Therefore, the April 2020 candle is when we start another VWAP. This is the first “handoff” VWAP on the chart with the other one in June of 2021 which will be discussed below.
  2. This number shows the double negative divergence forming on the monthly candles and the Williams % Range. The Williams % Range is a momentum oscillator that looks similar to the RSI but is more sensitive and gives quicker signals for divergences. In this case, we are using the “12” input to have a one-year “look back” for this indicator (12 months in a year). In this chart, you can see price continuing to hit new monthly highs as the Williams % Range is hitting lower highs, shown by the pink upward and downward sloping lines two different times. The fact price hit new highs twice while the Williams % Range hit lower highs twice makes this “double” negative divergence. Double negative divergence is seen as a longer-term trend reversal signal. As you can see, after the last higher low was put in on the Williams % Range in October 2021, the price started moving down to the June anchored VWAP handoff below.
  3. This number shows the second “handoff” point using the anchored VWAP handoff approach. In this case, we started another anchored VWAP at the June 2021 candle because this is the last time price touched the first anchored VWAP “handoff” line from April 2021. As you can see, so far in December, this has been a point at which the price action has been respected. A monthly close below this line would be seen as bearish with a continuation down to the March/April anchored VWAPs below around $30k-$32k.
  4. This number shows the monthly seasonality since the start of 2016 with the monthly win rates plotted on the bar chart. A win rate is simply the number of times a monthly close is higher than the previous monthly close. In this case, December has a 40%-win rate which means that the monthly close for December has been higher than November’s monthly close only 40% of the time since the start of 2016. This weak win rate with the technical weakness suggests the month of December may be tough for Bitcoin bulls.

We hope that this case study helps to show how striking a good balance between “clean” charting and a few useful indicators can help you to improve your overall trading performance by providing more insight into price direction and trend than price alone can offer. Why not try out some of these indicators along with the many others available on TrendSpider for 7-days free with this special offer.