Long Term View: again on price divergence

chartA couple of days ago one of my reader asked me about price and volume divergence, i decided to answer to him with this post talking again about it.

All the readers that follow me since 2011 know that i use a “net volume” indicator to understand the activity of buyers and sellers, it is computed taking the difference of a security’s uptick volume minus its downtick volume over a specified period, here i compute it on a daily basis with a 7 bars summation  (an entire week because it’s a daily chart). 

Often traders use such an indicator to judge the momentum or trend of a security in order to make assumptions about its future price movements. Net volume is an indicator that is also very similar to the idea of money flow and its indicator, the money flow index.

Now BTCUSD is hesitating around a price resistance (first positive deviation line of VWAP) but net volume is positive and till it remains positive i do not expect to see stronger down movements in the price, although we might see some consolidation beetwen the VWAP at 765$ and the actual price of $900.

Advertisements

22 thoughts on “Long Term View: again on price divergence

  1. Chomsky

    Enky, where is the Net Volume Oscillator indicator located? I could not find it in SierraChart.

    1. there is not, it’s a custom indicator, it’s computed using the difference from uptick and downtick volume, then i applied a summation of 7 periods or bar computed on that difference, you have to use the custom spreadsheet functions of sierrachart.

  2. Lukas

    Thanks for keep posting, I would like to kindly ask you, what is your key for resetting the VWAP. Sometimes you reset it on 1th of each month and this time it seems to be 17th or 18th November. The value of VWAP is different then.
    If I’ve got it right, resetting on 1th of each month is for short/mid-term VWAP and this is more-likely mid/long-term VWAP but why 17th November? Because the real rally start right since then?

    1. you can try to fit the vwap to catch as much as possible every recent top or bottom with the deviation lines and vwap. Another technique is to plot vwap from an important top and/or low; here to keep things easy i avoid to plot more then 1 vwap at once, but you can plot 2 or more since last tops and/or bottoms.

    1. Mike

      Enky,
      not to beat a dead horse, but it is truly uncanny how the low on bit stamp, exactly at $765.

      newsbtc.com/2014/01/09/coinbase-teams-bitmonet-make-bitcoin-app-purchases-reality/
      Also, check out this article. Bitmonet.com maybe the one to save the newspaper industry. The Achilles heel for the newspaper industry has been that no one wants to pay for reading their articles, given the only choice is to either monthly subscription or nothing. Bitmonet will allow the industry to have readers pay per article. Wow. That is where the CD industry went but still at a buck that is still not a workable model

    1. considering the high number of retards speculator of this market, yes it could be an issue:) as long as ghash approaches 50% of mining power there could be volatility on the market.

      1. Enky, the issue is more generic. Theoretically, GHash.IO can gang up with BTC Guild and own more than 60% of the mining. When it comes to billions of dollars, even the theoretically impossible things come true, so, let’s not ignore the issue. Instead, we need to voice it, and make sure people are watching more closely, and preventing abuse!

  3. Ivelin Ivanov

    Hello,

    It’s always nice to read your blog 🙂 What do you think is the trend for the next few days? Do you think the rate will pass the resistance or it will go under 875?

  4. Enky, I’ve always wondered: Coinbase uses Bitstamp and if a lot of big volume e-commerce store adopt it, it will generate a constant flow of BTC sales. Won’t this be a constant factor to drag Bitcoin price down? At the end of the day, neither BitPay, nor Coinbase stimulate commerce in BTC, on the contrary, they make it too easy for people not to try to really adopt Bitcoin, i.e. keep Bitcoins in their own wallets and flood markets with sales.

    1. I think the same, but this aspect is compensated by the tremendous amount of publicity for bitcoin, thus new investors will arrive supporting the price.

Comments are closed.