Golden Ratio lights the Way, Technical Outlook, Edition #211 (03/05/2022)
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They say sell in May and Go away.
But the crowd here at Qluster aren't known for being followers of the mainstream.
Especially when it comes to the markets.
Devotion to the Way of the Technical Practitioner compels us to look at each day as entirely new. As practitioners of technical analysis, we attempt to apply a balanced and well-researched perspective to identify opportunities through an objective lens.
This is the reason why we say instead.
"When the Golden Ratio holds, the Market ain't looking to fold..."
Although, a pertinent question needs addressing for cryptocurrency markets...
Woah, there are technical concepts ahead! Click here to read our article about the Golden Ratio and get some flavour around one of the most recognised technical indicators around 👉
Has the US technology stock sector finally planted a firm bottom?
A recent assessment points to a remarkable number of .618 Fibonacci retracement levels (Golden Ratio) appearing to have a firm hold on demand.
If demand continues to support prices at levels indicated by respective Golden Ratios, it would seem that the odds tilt favourably for a recovery in prices across the charts. Price action may offer clues for opportune dip-buying moments.
But first, some thanks are in order.
A special mention to George Saber, a respected figure in the crypto community and the Founder of Coin Observatory, for contributing to tonight's analysis. Our warmest appreciation for taking the time to scrutinise these set-ups alongside the Qluster Family!
Next, we have some secret sauce.
The Fibonacci retracement tool can be a powerful source of confluence when using technical analysis in a trading strategy. In general, retracements also tend to be more accurate than extensions.
Fibonacci retracements measure the potential pullbacks in a trend, while extensions can provide traders with an understanding of where the price may go in the direction of the trend.
Notwithstanding, the .618 retracement level is perhaps the most dominant ratio in the Fibonacci spectrum—it is the Golden ratio, after all :)
This is why the practitioners often use the critical level marked by the Golden Ratio as a proxy indicator to 'feel out' significant rejections or price bottoms.
Observe the two examples involving Bitcoin, $BTC provided below.
Bitcoin vs. US Dollar, $BTC - Daily (D1)
The Bitcoin daily chart above illustrates an idealised 'Rejection' scenario.
Notice how prices test the .618 Fibonacci retracement level (YELLOW) and appear to range multiple times at the top of a bullish uptrend.
Seemingly, this led to the market's eventual realisation that the breakout attempt had failed, drawing in additional selling action and driving prices downside.
Get the latest inflation update in Edition #210. Tap here to launch over to Charts in Action: Inflation Update and read the research coverage now 👉
Bitcoin vs. US Dollar, $BTC - Daily (D1)
The Bitcoin daily chart above illustrates an idealised 'Acceptance' scenario.
In this case, the market was so volatile that bears were unsuccessful after three attempts to swipe at liquidity staggered around the .618 retracement level (YELLOW).
This was followed by prices squeezing short-sellers to a swanky new all-time high at USD 69K.
Many tech-based stocks, and even some indexes, appear to hint at re-tests of their respective .618 retracement levels moving forward. Despite the US Federal Reserve becoming notably more aggressive with interest rate hikes to battle inflation, these crucial Golden Ratios appear to hold at present.
Assuming this 50 basis-point (0.5%) adjustment is already priced in for the May meeting of the FOMC, then markets are likely to mimic a similar behaviour to March.
The Federal Open Market Committee (FOMC) meet on a bimonthly basis to discuss policy matters, including decisions around interest rates.
A rate hike had already been priced in before the March hike.
What happened next was the markets rebounding shortly after the Fed made their first 25bp adjustment to the official US key cash rate.
The information on this website is for general information purposes only. It is not intended as legal, financial and/or investment advice and should not be construed and/or relied on as such. Before making any commitment of a legal and/or financial nature you should seek advice from a qualified and registered legal practitioner and/or financial and/or investment adviser. No material contained within this website should be construed or relied upon as providing recommendations in relation to any legal and/or financial product. Qluster does not recommend and/or endorse products and does not receive remuneration based upon investment and/or other decisions
US Tech Nasdaq 100, US100 - Weekly (W1)
Apple Inc., NASDAQ: AAPL - Weekly (W1)
Tesla, Inc., NASDAQ: TSLA - Weekly (W1)
Amazon.com, Inc., NASDAQ: AMZN - Weekly (W1)
A continuation of what this means for cryptocurrency, apparently the most highly correlated asset class to technology stocks at the moment, will be had in a coming edition of the Technical Outlook.
Q’s Conclusion
It would appear that the largest companies on the Nasdaq 100 stock index by market capitalisation, each seem to mirror similar patterns with the market index.
But, be wary. Excessive exuberance can be very dangerous and destructive for one’s trading purse.
Careful risk management is always a necessity. One of many possible examples might be to avoid too much capital exposure in leveraged positions before a bottom has been confirmed.
In comparison to leveraged purchases or trading in derivatives markets, purchases in spot markets (i.e. buying coins with equity) will inherently reduce risk at these key support levels until evidence of break down* presents itself.
*If they break down.
That remains to be seen…
See you again for the next update.
- q
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The information on this website is for general information purposes only. It is not intended as legal, financial and/or investment advice and should not be construed and/or relied on as such. Before making any commitment of a legal and/or financial nature you should seek advice from a qualified and registered legal practitioner and/or financial and/or investment adviser. No material contained within this website should be construed or relied upon as providing recommendations in relation to any legal and/or financial product. Qluster does not recommend and/or endorse products and does not receive remuneration based upon investment and/or other decisions
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