The video is about understanding divergences. Currently, two divergences are at play within a short span leading to uncertainty in price action. Check it out to assess the situation based on techni...
Transcript
Hello everyone, welcome to the RR ratio. In today's video, I want to talk about the battle of divergences, which is going on right now in Bitcoin's price section. But first, I want to explain a bit about what the divergence is for people who are new to this term. The divergence occurs when we look at the price. and the indicator, and we see that they both are going in opposite direction. So when prices going downwards, making lower lows, and the indicator doesn't matter which one, usually it's an oscillator, like relative strength index or some range oscillator, or stochastic RSI, something like that, when that indicator makes a... higher low, so that becomes a divergence. There are different levels of divergence, strong, medium, weak, and there is one special one, which is the hidden divergence, and in this case, it feels like the price is going higher and the indicator is going lower, and this feels very counterintuitive to the other divergences. this kind of divergence usually trap the traders or investors. But it's good to keep an eye on different types of divergence and make a calculated decision on whether it's a good time to enter or not. But there comes some time during the market where divergence are pretty confusing. and I think that one of those times is right now. So, the first observation which I would like to bring here is, if we look at the price from June 15th to today, you see that the price is going basically downwards, right? For this we are looking at it from bearish point of view because we are focusing on the higher side of the price, so only the highs. And for the highs, if you see it's a higher high, equal highs, and here again it's a higher high. This is somehow the hidden one, at least falls in this category, where if you are looking just at the price, it's a lower high. And if I look at the indicator, I have added a range oscillator. You can simply click on indicators, type in the range oscillator, and you will see your range oscillator. It's by Ziemann, and once you add it, you see quite some nice shades of bullish trend, of bearish trend. But coming back to the divergence, here we see a lower high is formed, and From here to here, we are saying indicator going upwards, it's going higher high. So this tells us that price might go down. Yeah? Now, if I look at bit further away and if I look at the lower end, so I want to look at the lows of the price. So if I click from here till here, we are targeting only the lows of the price, and here I'm targeting the lows of the indicator. So here, the price is making lower low, which is... in this category, which is in the bullish category, where the price is making lower low, also here. And the strength of divergence is defined by what is the indicator doing. In our case, the range oscillator, the indicator is going upwards. The value is going from here, it's at minus 460, it's going to minus 272 approximately. So that's making a higher low. And that is the bullish divergence. So it is playing out bullish right now. If you would, if you would look at just yesterday's price, this made a bullish divergence. And price is right now in upward direction. And since it is on the daily time frame, I would assume that there is more strength in this price section compared to if you would say, if the divergence is only on the four hour timeframe. But if you look at the four hour time frame, it is still a bullish divergence. If I bring back our divergence chart, you see the price is making lower low on four hour. the indicator is making a higher low and this played out or is playing out quite well we see that price has bounced up from this point and it's showing quite some bullish strength here so how far can it go that is the question right and here and here we bring in the order block idea where we try to see where the break-off structure happened. So one of the break-off structure was here. And the break-off structure is that whenever the price makes a swing point, like this one, where the price goes down, makes a sharp, let's say, turn back, a return, and then when this price is broken that is what we call break of structure this break of structure happened because of this particular candle this particular growing candle and that usually marks as the bearish order block we are very close to this price to reach so it can happen that this bullish divergence head strength only up till here, or it might go slightly above, take some sweep to the liquidity sweep because there is also a fair value gap. It's another concept from order block and fair value gap happens when you have such a strong candle downwards without any price action in between. So we had this very small bullish candle, and then a strong bearish candle, and then in between this to price, which is basically this rectangle, there was not much happening, there is no sideways action, and that's when we call it a fair value gap has formed. Price usually tends to go to the order blocks, break of structure, or the fair value gaps. We see that price has already crossed back to the break-off structure, and right now it's very close to the parish order block. And if not here, then there is a good chance that it might come to the fair value gap. But once it reaches to this point, then we would have to reevaluate whether there is still strength remaining in the price. in the market for the price to go upwards and go ahead of the bearish order block. If I, let's say, go back to the higher timeframe, which is our daily time frame, here, my understanding would be that we had this bullish order block. The price has answered to that, sorry, not the bullish order block, but bullish divergence. We have this bullish divergence which formed yesterday. And price has answered to that bullish divergence by going upwards. So, this historical part is basically done. Now the new one comes to the picture and that is the bearish order block. Ah, same mistake. Varish divergence. So here I see if I take it from June again, from here this one, the price is making lower highs and the range oscillator is making higher highs. From here to here, it's a direct one. If I consider from even more recent price action, you see it again, it's making a higher high. So we are right now forming the hidden divergence that is lower high in the price. This thing is basically done. price has responded to the bullish divergence happening, now it's time for price to respond to the bearish divergence. Though I'm not saying that it would flip already right now or tomorrow. But if it continues to play like this, price might go slightly above, it will be still under this order block, this one, and then it would go back and continue its bearish trend. So, we do see rallies usually in July, and that is quite typical for the bear market years. And in this, in this case, I feel that the battle of divergence is quite interesting in the sense that we see bullish divergence happening, we see various divergence happening, but we have to also give a weightage to how the price responded after a divergence happened, and how far in the history did the divergence begin. The bullish divergence began. on June 5th, so that's where we consider the start. So, over here, this is done. The barest divergence, the recency of bearish divergence is June 22. And this has not been responded by the price. We are still in the uptrend, we are still playing out the response which comes from the bullish divergence. The bullish divergence might go until this point, and then that would be the end. But if price continues and breaks above this order block, and if oscillator reacts differently, then we would have to consider that the bearish divergence is no longer in place. So there is no role of bearish divergence, the battle has been won by the bullish divergence. But given that we are in the bear market, and we know that from our model of distribution and accumulation lines, that when the price is between these two, we are in a bare market. So my bias is towards price going downwards in coming days. And just to see how far we are from accumulation line, it's not really that far we are around 86 days so approximately two months and three and half weeks and the exact date which we have identified is for our price to cross accumulation line is 27th September and Let's say by start of October, which is Q4, we see a drop in first week or second week of October. That would mark the bottom for this particular cycle. I think that would be all for today's video. If you like the content, then do hit the subscribe button, and I will see you in the next video on the RR ratio. Bye-bye.