The signal we will look at today is a lower low and how this can lead to a reversal/change of trend.
We know that a higher low signals strength and can lead to the continuation of a trend, specially if this is a long-term higher low, more than 6 months.
A lower low can have the same effect as the market moves in cycles… Let me show you.
This is the chart for Orchid vs Bitcoin (OXTBTC)
- The date of the initial low is May 2022, the Altcoins market capitulation low.
- After more than 10 months or 310 days, OXTBTC hits a lower low, March 2023.
A higher low was hit January 2023 but the pair did not have enough strength to continue higher and thus it moved to produce a lower low.
This lower low does not signal that this pair will continue to move lower and lower as the volume profile reveals. If this pair were set to continue producing lower lows, the volume would be higher in this new low compared to May 2022 yet, this new low produced now bear/red volume.
The new low happens as the market looks for liquidity before moving higher.
On top of the volume signal, if we look at the indicators we get additional confirmation. The MACD and RSI both produced a higher low which is a strong, long-term bullish divergence.
This is how you can spot a lower low as a reversal signal. All signals need to be taken together in context with the broader market.
A lower low signaling the continuation of a bearish trend would need to hit a new support level based on Fibonacci proportions, it would need to be supported by high volume as well as the indicators, in the absence of these, we can say that the market is weak and moved lower just to bounce back up with strength.
When trading Altcoins, one does not need to catch the exact/perfect bottom, instead, one can look for a support level to buy and wait and let the market take care of the rest.
Let me show you an example, this is the chart for Stratis (STRAXBTC) on the daily timeframe.
- Stratis (STRAXBTC) is stronger than Orchid and thus no lower low is needed.
- Notice the same initial low in May 2022 followed by a higher low.
- Today, the recovery is so strong that more than 30 days of correction are recovered in a single day, this is supported by high volume.
What one does, the rest follows.
We can see something similar happening with Orchid and the rest of the Altcoins vs Bitcoin (ALTSBTC) pairs.
Patience is key. Some pairs can recover months of correction (going down) in a single day.
In a week, you can go from -50% to green.
If you trade long-term, you just need to buy when red/near support and wait until the start of the next bullish wave.
Leave a Reply