One big candle on high volume pierced through the entire cloud and into bullish territory. As a rule, a piercing of the cloud is followed by some muddling around in the cloud testing support and resistance.
The conviction with which this one candle burst through the cloud changed the trend in one trading session. See chart below:
Other confirmations of the new trend have also occurred. Cloud Span A has crossed over Cloud Span B. This means the new cloud forming is bullish and should provide support as price moves higher.
As the old saying goes, old resistance now becomes support. Another buy signal was triggered when the Standard Line crossed over the Turning Line. When this happened, the Standard Line actually pierced into the cloud because of how powerful the move was. This is another bullish sign.
The final sign is volume. Volume has picked up significantly on an up day, which has not been seen this high in quite some. Volume generally precedes price. So a pick up in upside volume should be seen as bullish as well.
Conclusion
While a pullback is possible, the trend is now bullish.
The cloud should provide support and buying on pullbacks is probably what one should be doing. If price were to pierce back into the cloud, it would remain bullish, as the direction from which the price goes into the cloud should be used as your benchmark.
However, going into a cloud is always a warning signal of a trend change and at that point caution should be used until the direction is resolved.
Written by George Samman, former Wall Street Portfolio Manager and Co-Founder and COO of BTC.sx
