Trading a Bearish Pin-Bar [EOSBTC | Daily | 11/11/19]

EOSBTC has established a rough outline of a bearish pin bar pattern on the daily of yesterday’s candle. However, until the most recent candle slips below the nose of yesterday’s candle (the time to short), this is an observation that should not be acted upon.

EOS is currently trading above many major diagonal trend lines, that have slowly had more positive slopes (uptrend starting). This means that EOSBTC is attempting to base. However, we expect a potential reversal into support below as RSI and stochastics may be ready to turn over.

We have seen this continued ping-pong like pattern (red & green arrows) in EOS that is expected to “ping” or “pong” very soon. EOS traditionally trades in very range-bound patterns and when it exhibits traditional exhaustion, it is usually the top of the range. We can see the past several times when RSI and stochs cross over to the downside (marked in purple).

Regarding BTC Dominance

Many on Twitter are pointing to Bitcoin Dominance (BTC.D) in hopes of forecasting the next alt-season. We can see on the weekly that if BTC.D declines below 67% it can drop through the LVN into 65%. This would allow for altcoin prices relative to BTC to rise drastically. The question then becomes, is the top in for BTC.D or will it break above the trend high though block reward halving?

While I like to use this indicator for identifying the relative strength of altcoins, it is hard to say the current trend will reverse on a day by day basis. This means that price movements relative to BTC in the near term can be noisy, while the longer term we may have the signal of lower dominance. From the weekly we can see the decline of dominance, however BTC has a historic trend of pumping immediately off support, so only use BTC.D if you are nailing pivot points and not mid-trend.

Now onto Pin Bar Trading…

What is a pin bar pattern?

The pin bar pattern comprises of one price bar, usually the price bar of the candlestick, which reflects a rapid reversal or rejection of the price. The pin bar reversal is characterized by a long tail, also referred to as shadow or wick. The region between the open and the close of the pin bar is considered the real body,” and the pin bars usually have compact real bodies due to their long tails.

The tail of the pin bar indicates the price range that has been rejected and the assumption is that the price will continue to move in the opposite direction to the tail lines. Therefore, the bearish pin bar pattern has a long upper tail, indicating rejection of increased prices, with the likelihood that the price will go down in the near term. The bullish pin bar pattern has a large lower tail, which indicates a reluctance to lower price, with the result that the demand should increase in the near term.

Trading The Pin Bar Pattern

There are a number of different entry strategies for investors while trading pin bars. The first, and perhaps most famous, is to join “at market”. Simply meaning that you enter the market at the current price. A trader can also enter a pin bar trade by entering just below or above the pin bar.

Note: the pin bar pattern must have closed candles making this pattern before entering the market on the basis of it. 

Another option for the pin bar trading pattern is to enter on a 50 percent retrace of the pin bar. You’d be waiting for the price to decline back to about halfway across the pin bar range from high to low, or its “50 percent point,” where you’d already put a limit entry order.

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