Signals, the queen moves

Not England’s queen, the financial markets queen.

The financial market is like a chessboard. We can see the board, and the movements that take place on it. We know some of the pieces that play, rooks, knights, bishops, although not all of them, and what their possible moves are. The game is not about taking the king, but about understanding the rules of the game and trying to predict whether White or Black, bullish or bearish, will dominate in this game that never ends.

And for that we use “signals”, moves that could indicate an important change on the game board.

 The crossing of the 50-week moving average (M50W) and 100-week moving average (M100W), would be similar to the queen’s move in chess, long moves that can cross from end to end of the board and that define the color of the game.

 On August 5, for the third time in history, two important moving averages made a bearish intersection on the Bitcoin (BTC) chart and although it seems a paradox, this could be a bullish signal:

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Although having two signals is statistically too poor to draw conclusions and the price of this digital asset is affected by many factors outside the BTC value model, it is an asset that in the long term follows a fairly clear and reliable mathematical figure since its inception with its cycles and volatilities.

 These are long-term signals. Let’s look at the history of this signal in BTC:

  • April 20, 2015.
  • February 18, 2019.

 In both cases, the signal occurred 12 weeks after BTC touched its low.

  • 2015: 14 weeks / 98 days from its low at $164.
  • 2019: 10 weeks / 70 days from its low at $3148
  • 2022: 12 weeks / 84 days from its low at $17,607

 Continuing with the logic of this signal, if we look at the history, the next control point would be the time when the M50W (50 weeks) re-crossed with the M100W which was May 16, 2016 and December 9, 2019 (red lines).

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If we extrapolate now this bullish crossover signal between the two averages using the historical data, we see that it can occur after 49 weeks, that is, August 2023. And if we extrapolate in price between these two signals, in 2015/16 it rose 111% and in 2019 104%, which would put us in 2023 at about 40K price for BTC.

 I repeat, there are factors that can affect such analysis by moving weeks, ranges, etc. But look at the “Black Swan” of March 2020, Covid impact. The drop was spectacular, but if you take it in perspective, this model is resilient in the long term.

Yours in crypto.

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