Updated Jan 29, 11:42am

If you want to learn about technical analysis…..the voodoo of trading – BTC or any volatile asset is a great place to start and do a little research.

Investopedia defines Technical analysis as a trading discipline employed to evaluate investments and identify trading opportunities by analyzing statistical trends gathered from trading activity, such as price movement and volume.

The DTM5 employs TA to improve entry / exit points, and serve the strategy as both a short and long term price trend indicator. For example, I might look at longer term technical Indicators to help frame up a thesis or identify trend cycles.

Oftentimes, in early stage companies, there isn’t enough liquidity / volume to give legitimacy to TA. But in more liquid securities, I think TA can be a useful tool in the investment kit. Faithful readers will know I like to keep it simple. TA is a really cool rabbit hole to go down, but I’m a believer in the law of diminishing returns, so early on I settled in on a few key indicators that have reliably served me over the years.

I find various moving averages can be useful to filter out the noise of price movements and volatility to help identify underlying trends. The relationships between MAs can be indicative as well. Crossovers, bounce offs, etc. I particularly watch the relationship between 20, 50 and 200 Day MAs. The MACD (Moving Average Convergence / Divergence) is something I’ll consider.

Support levels and shape formations are interesting. They can frame up what has happened and even give some insight into what may be occurring. I’ve always found triangle formations can be very useful.

Lets take a peek at the 8 week chart of BTC (Bitcoin) as of 3pm EST Jan 27th.

Since the BTC price top on Jan 10, there were a series of ‘lower highs’, which created a declining trend across those highs. Interprutation: Each subsequent rally of BTC could not reach its previous high water mark, which is an indicator of a weakening price trend.

A support level of around 32,000 can be seen by drawing a horizontal line across previous downside support prices.

The two lines intersect to form a clear decending triangle – Not necessarily a bearish indicator but definitely directional change indicator when they come together.

The 50 day moving average (green dots) looks strong, positive and steady. The recent downward trend hasn’t yet pulled it over. Of note, it is preparing to intersect with the descending triangle at the triangle’s inflection point – I’d interpret this as a real indicator of directional change. Two directional indicators and a support level about to connect. That’s heady stuff!!

The 3 horizontal lines I’ve put on the chart show potential downside resistance levels should BTC break down further below where its currently trading with any momentum.

Lets get a little closer to the short term action with a 4 week chart:

We have a clear descending Channel. Pretty obvious huh? An interesting point is the price testing the support level three times so far in this correction, AND finally bouncing off the 50 Day Moving average. Again, what I’m looking for is some sort of confirmation either way – Either a decisive breakout of the channel to north or south, or a strong penetration to the downside of the 50 day MA.

My tea-leaf reading is telling me that the BTC price trend is:

1) bearish in the short term, descending in an organized fashion (which, counter intuitively, could be considered reasonably positive for longer term bulls as a consolidation move), and

2) With the closing of the descending Triangle about to intersect the 50 day MA, a decisive price move is almost upon us. Based on the chart, I’d think the risk is to the downside here, particularly coming off such a parabolic move upward. I can’t ascertain which way the wind will blow, but I’m happy with my lowered Crytpo exposure at this point.

UPDATE – 11:42am Jan 29 – Well, Its nice being right some of the time…..Yesterday morning I noted: “With the closing of the descending Triangle about to intersect the 50 day MA, a decisive price move is almost upon us‘.

Well, check out what happened in the past 12 hours:

What we have here is a very sharp (Decisive) move to the upside, getting within spitting distance of the support level (dotted red) of the previous month-long bull trend. Looks like a breakout – BUT – Considering this was launched by a tweet from Elon Musk….who knows. The price could just be gasping at the peak of its recent ascent. Time will tell.

But, its really cool to see that triangle formation act as an indicator. It is usually some sort of catalyst that gets things moving, I didn’t expect it to be Elon. But hey, that’s investing!