Technical analysis thread

[lebing]

Triangle I noticed today is forming pretty well. Since it is an uptrend now it has a higher chance of breaking up making right now a pretty decent place to buy a short term speculative long.

 

[lebing]

Triangle broke (obviously) and we can now look at the Fibs from the whole retrace to see where the resistances lie. I suspect we will retrace at least 50%, likely upt to the .618 retracement before a correction of any note.

 

[solex]

Something quick that I like to use to find the "resting" price after a period of volatility is this formula:

resting price = sqrt(cycle_low*cycle_high)

So, using Bitstamp figures, sqrt(198*502) = $315, which was close to where the price stabilised. So the current spike can be considered a breakout with new momentum, which I know is obvious now, but it is telling us that $315 is the new floor (bye-bye $200s

 

[theZerg]

Why geometric mean not average?

 

[awemany]

@theZerg: A reason could be the assumption that price movements are exponential?

 

[solex]

@awemany and @theZerg

Yes, price movements are assumed to be exponential, all other factors being equal. It's a simple concept which is constantly overlooked. Consider the price of any market product chosen at random, say a share at $100. The probability that its price will double is same as it halving, and the same again later. So a future price of $400 is as likely as $25.

I noticed this behaviour (having spent a number of years staring at charts) and found out later that it was an old discovery, known as Square Root Theory although I am not sold on squares of low whole numbers (like 64 and 81) being significant, just the principle that it is a better way of measuring change in sentiment than simple arithmetic evaluation of prices:

http://www.gold-eagle.com/article/rangy-and-square-root-volatility-srv
http://ensign.editme.com/t14square

 

[awemany]

@solex:
I didn't know anything about square root theory, though I am also not a trader at all.
So I learned something new today, thank you!

I agree, intuitively ratios are often the figure of interest for stocks and the like, so the geometric mean makes sense.

 

[lebing]

We just broke resistance and set a short term new higher high. This means the next major resistance stands at our medium term high of 502. Very good opportunity now for a medium term speculative long.

 

[lebing]

Looks like we will be hitting 500 as planned shortly. If it happens in the next 24 hours I imagine a quite swift pullback and consolidation. If it breaks through and the daily candle closes above 500 across the major exchanges, then watch out. There is very little serious resistance until the ATH.