GBTC Bitcoin Trust: Weekly Trend Momentum Turned Bearish

By July 15, 2019Bitcoin Business
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With the market closing below 15.54, we are coming into this week with a bearish trend momentum.

For next week, buy 1 (B1) is at 13.91 and buy 2 (B2) at 12.97.

The market will trigger a buy signal if it tests 13.99 or 12.97 and then comes back above and closes above those levels.

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On July 10, we published a report on Seeking Alpha about the GBTC, "Grayscale Bitcoin Trust: Cover Longs on Any Rallies to New Highs." In the report, I said that the strategy to follow as the market made new highs to 15.74 was to liquidate longs into this rally. The market made a high of 17.70 and came right back down to close at 15.24, activating that 15.74 target. It almost reached the 15.80 sell 2 (S2) level anticipated in the report.

Next Week

As I write this report on July 13, 2019, Grayscale Bitcoin Trust (OTCQX:GBTC) closed at 14.85. As we come into this week, we have identified the average price as 15.54. With the market closing below 15.54, we are coming into this week with a bearish trend momentum.

Once the Variable Changing Price Momentum Indicator (VC PMI) identifies the trend momentum of the market, it also identifies the extreme level below that mean. For next week, buy 1 (B1) is at 13.91 and buy 2 (B2) at 12.97.

"This is the area where you might want to consider going long if the signal activates those trigger points," said Equity Management Academy CEO, Patrick MontesDeOca. "This is what we teach at the Equity Management Academy; the methodology behind the VC PMI's automated artificial intelligence algorithm."

In this case, the market would trigger a buy signal if it tests 13.99 or 12.97, and then comes back above and closes above those levels.

"Although this is a very simplistic format in structure," MontesDeOca explained, "it has embedded in it a perfect combination of a Fibonacci sequence of five, which identifies precisely the average price and the extreme levels above and below that average price. As a self-directed trader, you can then execute trades based on those levels."

The artificial intelligence algorithm in the VC PMI identifies the extreme relative implied volatility levels in relation to the average price. The S1 and B1 levels have a 90% probability of the market reverting back to the mean, while the S2 and B2 levels have a 95% probability of the market reverting back to the mean. The mean is a 50/50 standard deviation, while each level above or below it is a standard deviation above or below that mean. The system does not take into account any fundamentals. It uses artificial intelligence, without emotion, to analyze the relative implied volatility of the market to predict where and when to enter the market with the highest probability of a profitable trade using the extremes. The algorithm is run on the Trade Station platform.


As we come into next week, the close below the average price of 15.54 has activated a bearish trend momentum and has activated the B1 level of 1391 to 12.97. When prices are activated at these levels, go neutral after you cover your positions, then allow the market to activate the signals, either from B1 or B2. A close above 15.54 negates this bearishness back to neutral. A second close above 15.54 activates the S1 targets and S2 targets above the mean of 16.48 - 18.11.

The VC PMI Automated Algorithm

We use the proprietary Variable Changing Price Momentum Indicator (VC PMI) to analyze the precious metals markets and several indices. The primary driver of the VC PMI is the principle of reversion to the mean ("Mean Reversion Models of Financial Markets," "The Power of Mean Reversion in Factor - Based Investing"), which is combined with a range of analytical tools, including fundamental logic, wave counts, Fibonacci ratios, Gann principles, supply and demand levels, pivot points, moving averages, and momentum indicators. The science of Vedic mathematics is used to combine these elements into a comprehensive, accurate, and highly predictive trading system.

Mean reversion trading seeks to capitalize on extreme changes in the price of a particular security or commodity, based on the assumption that it will revert to its previous state. This theory can be applied to both buying and selling, as it allows a trader to profit on unexpected upswings and buy low when an abnormal low occurs. By identifying the average price (the mean) or price equilibrium based on yesterday's supply and demand factors, we can extrapolate the extreme above this average price and the extreme below it. When prices trade at these extreme levels, it's between 90% (sell 1 or buy 1 level) and 95% (sell 2 or buy 2 level) probable that prices will revert to the mean by the end of the trading session. I use this system to analyze the gold and silver markets.

Strengths And Weaknesses

The main strength of the VC PMI is the ability to identify a specific structure which price level traders can execute with a high degree of accuracy. The program is flexible enough to adjust to market volatility and alerts you when such changes take place, so one can adjust strategies accordingly. Such changes include when the market breaks out of a consolidation phase or a trend accelerates. Such volatility usually happens when the market has produced a signal at the S2 or B2 level, and the market closes above or below these extreme levels.

The day trading program then confirms that a higher fractal in price has been identified, and the market will move significantly higher, although the same principle applies if the market falls significantly. The price closing above the S2 level indicates that the buying demand is greater than the supply. This means that the market has found support for the next price fractal. Conversely, the price closing below the B2 level indicates that the selling pressure has met demand greater than supply at the extreme below the mean, and prices should revert back to the mean.

The basic concept of the VC PMI is that the program trades the extremes of supply and demand based on the average price daily, weekly, and monthly.

The strongest relationship we find in the algorithm is when the daily price is harmonically in alignment with the weekly and monthly indicators. We call this "harmonic timing." Such an indication produces the highest probability (90%) that the price will revert from these levels to its daily, weekly, or monthly average.

To learn more about how the VC PMI works and receive weekly reports on the E-mini, gold and silver, check out our Marketplace service, Mean Reversion Trading.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in GBTC over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

With the market closing below 15.54, we are coming into this week with a bearish trend momentum.

For next week, buy 1 (B1) is at 13.91 and buy 2 (B2) […]

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