August 4, 2020

Livermore's expanding wedge of accumulation

In 1929, Jesse Livermore published this hypothetical graph showing “All the most important thing occurs with stock price A. ” At the beginning of this pattern is an expanding wedge of accumulation, an upward megaphone of two oblique lines. What does this have to do with bitcoin?

Let's first look at this pattern onstock example. Bulkowski calls it an “upward expanding wedge” and cites the test results on historical stock market data. He found that, being formed during a bull trend, this pattern most often breaks down (58/224).

However, there have been cases in stock markets wherethe formation of the accumulation wedge, immediately after point 7, was followed by a rapid increase in price. An extended version of the Livermore pattern implies the use of trading volume (low or high) at points 1–10 as an indicator. Below is an example for $ AAPL from @peterbrandt.

In the 2015–2017 rally it was possible to observe two accumulation wedges in a row: the first one (lower graph) was formed from October 2015 to March 2017, before breaking through the boundaries of the first wedge and forming a second accumulation wedge (upper graph). Please note: the scale on both graphs is linear and the vertical pink line is the same. The price increase from the bottom to the top is about 86 times.

Here is another example of an expanding wedge of accumulation, already on the Bitcoin chart, from December 2010 to June 2011; price increase from the bottom to the top - about 178 times.

There is a possibility that BTC is now inpoint 7 of another wedge of Livermore accumulation. Below is a chart for early August, on the left is a logarithmic chart, on the right is a linear chart. The trading volume profile corresponds to the setup on the Livermore speculative chart.

It is important to note: this is not a financial recommendation, I only pay attention to a pattern that may not meet expectations.

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Bonus: accumulation wedge inside the accumulation wedge. Only in Bitcoin.

Livermore Accumulation Wedge -> Livermore Distribution Wedge. 15 minute inverse Bitcoin chart. The rebound may already be very close.