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Breaking News: ‘Crypto Week’ Takes A Hit: US House Fails To Advance Key Acts

No New Lows: “Parabolic” Bitcoin Indicator Could Suggest The Local Bottom Is In

Tony "The Bull" Severino
Tony "The Bull" Severino
1 year ago
4 mins read
bitcoin bottom parabolic sar

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When Bitcoin rallies, it historically has gone parabolic and blasted off to astronomical prices before each cycle peaks. Recently, rallies have been few and far between, cutting the price per coin down to around $33,000 at the local low.

The plummet, however, fell short of tagging a “parabolic” indicator and it could mean that the local bottom is in. Here is more about the Parabolic SAR, the potential signal, and other supporting evidence that the bottom might already be in.

Parabolic Uptrend Intact, Says Indicator With 95% Confidence Rate

Bitcoin price has repeatedly gone parabolic to conclude any major cycle peaks before entering a bear market. While the recent sentiment and price action across crypto has been deceptively bearish, there are plenty of signs that Bitcoin is still in a bull market.

One of those signs not only suggests the uptrend is still in tact, but that the local bottom of the recent downtrend could very well be put in. That signal is the Parabolic SAR on monthly timeframes. The higher the timeframe, the more dominant the signal, and there are few as important intervals at the monthly.

Related Reading | Bitcoin Begins Bounce From 7-Year Bull Trend Line

During the month of January, Bitcoin price action stopped precariously at the Parabolic SAR indicator – leaving nothing but a wick right up against it remaining. When February opened, Bitcoin continued higher, forming a green candle and leaving three months of unexpected downtrend behind.

As each month progresses, the Parabolic SAR moves up or downward along with price action. With Bitcoin price trading above the Parabolic SAR, up it went in February, meaning that the indicator will be touched if a retest of January’s lows occur. It also could mean that January’s lows are never revisited. Or at least not for some time.

BTCUSDT_2022-02-08_14-50-27

The downtrend stopped right at the Parabolic SAR | Source: BTCUSD on TradingView.com

Backing Up The Idea The Bitcoin Bottom Is In

The Parabolic SAR stands for “stop and reverse” and the indicator is designed to do just that: tell a trader when the trend has stopped, and reversed. It is so effective in this regard, that traders often place their stop loss directly above or below the SAR depending on the direction of price.

If the SAR is touched, it tells a trader that there is a strong probability the trend is over. If the SAR isn’t touched, traders move their trailing stop loss continuously just above or below it. The fact that Bitcoin price stopped short of the SAR on monthly timeframes could indicate that a major player is using the tool for a trailing stop loss, and could be interested in protecting that position.

Related Reading | Crypto Correlation: Comparing Bitcoin And The S&P 500 Flat Correction

Or of course, the tool is working exactly as J. Welles Wilder designed it to. Wilder also created other effective and commonly used technical analysis tools, such as the Relative Strength Index, Average Directional Index, and Average True Range.

BTCUSD_2022-02-08_14-52-47

The middle-Bollinger Band and Ichimoku base line back up the SAR theory | Source: BTCUSD on TradingView.com

Although the Parabolic SAR is often considered a lagging indicator, over 17 years to research found that it had a 95% confidence rate. But if that still isn’t enough to potentially create more confidence after such a brutal selloff, the monthly Parabolic SAR also appears to coincide with the monthly Bollinger Bands basis line (left, middle band) and the Ichimoku base line (right, red line).

Is this enough to stave off a further breach of support by bears and lower prices? Only time will tell. But if no new lows are put in and the uptrend continues from here, will that increase your confidence rate in the Parabolic SAR?

https://twitter.com/tonyspilotroBTC/status/1491143733231833088

Follow @TonySpilotroBTC on Twitter or join the TonyTradesBTC Telegram for exclusive daily market insights and technical analysis education. Please note: Content is educational and should not be considered investment advice.

Featured image from iStockPhoto, Charts from TradingView.com
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Tony "The Bull" Severino
Tony "The Bull" Severino

Tony "The Bull" Severino

Tony "The Bull" Severino, CMT, is a distinguished figure in the cryptocurrency analysis sector, renowned for his in-depth technical expertise and innovative approach to market trends. As the Head of Research at NewsBTC, Tony leads a team dedicated to providing cutting-edge insights and forecasts, helping both novice and experienced traders navigate the complexities of the crypto market.
A seasoned Chartered Market Technician, Tony's prowess in identifying and capitalizing on market patterns is unmatched. His academic and professional journey in market analysis has firmly established him as a leading authority in technical trading strategies. Tony’s approach is heavily influenced by the principles of Elliott Wave Theory, a method known for its rigorous assessment of investor psychology and price movements.

Read more

Beyond his role at NewsBTC, Tony is the visionary founder of CoinChartist.io, an educational platform aimed at demystifying the nuances of cryptocurrency trading. CoinChartist.io serves as a valuable resource for traders seeking to enhance their technical analysis skills. The platform offers a range of learning tools and resources designed to empower traders with the knowledge to make informed trading decisions.

In addition to his educational initiatives, Tony is a prolific author and a dominant voice in the crypto community. He writes the CoinChartist VIP newsletter, a weekly dispatch that has become a staple among crypto enthusiasts, revered for its insightful analysis and actionable trading advice. This newsletter has consistently ranked as a best-seller on SubStack, boasting thousands of subscribers who rely on Tony’s expertise to guide their trading strategies.

Tony is also celebrated for his literary contributions to the field. He is the author of the highest-rated Crypto Trading Journal on Amazon.com, a testament to his ability to communicate complex trading concepts in an accessible manner. This journal is widely regarded as an essential tool for traders aiming to track their progress and refine their strategies.

Before his ascent in the financial analysis world, Tony honed his skills in journalism. His background in this field has endowed him with a unique ability to present intricate market dynamics in a clear and compelling manner, making his insights highly sought after by a broad audience that ranges from casual readers to professional traders.
His professional affiliations underscore his commitment to excellence and continuous learning. As a partner of Elliott Wave International and TradingView, Tony collaborates with other leading experts to enhance his knowledge and skills. His active membership in the CMT Association further aligns him with the highest standards of industry practices and ethics.

Tony’s nickname, "The Bull," aptly reflects his aggressive and optimistic outlook on the cryptocurrency markets. His forecasts often anticipate significant upturns, earning him a reputation for bullish predictions that have frequently led to lucrative outcomes for those who follow his advice.

In summary, Tony "The Bull" Severino, CMT, is more than just a technical analyst; he is a mentor, educator, and innovator whose influence in the cryptocurrency space continues to grow. His dedication to advancing the understanding of market forces and his commitment to providing high-quality, reliable analysis make him a pivotal figure in the world of cryptocurrency trading.

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Disclaimer: The information found on NewsBTC is for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.

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Reason to trust

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Created by industry experts and meticulously reviewed
The highest standards in reporting and publishing
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