MACD Sees Through Major Player's Wash Trading Scheme
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Divergence Phenomenon
1/Base Divergence
During a decline in coin price, if the coin price hits a new low but the MACD indicator's DIF line or MACD histogram does not simultaneously hit a new low, this is a base divergence. This often indicates that the downward trend of the coin price is about to end, as the major player may be conducting the final wash by suppressing the coin price.
For example, if the price drops from 10 yuan to 8 yuan, then to 7 yuan, continuously hitting new lows, but at this time the MACD's DIF line rises from -0.5 to -0.3, a base divergence appears. This indicates that although the coin price is declining, the downward momentum is weakening, and the major player may be secretly accumulating; consequently, the coin price is likely to experience a reversal and enter a major upward wave.
2/Top Divergence
During a rise in coin price, if the coin price hits a new high but the MACD indicator's DIF line or MACD histogram does not simultaneously hit a new high, this is a top divergence.
However, during the wash trading operations before a major upward wave, the major player may create a short-term illusion of top divergence. At this time, it is necessary to combine the position of the coin price and other indicators for a comprehensive judgment.
If a seemingly top divergence occurs at a relatively low position of the coin price, but there are no obvious signs of increased trading volume, and other technical indicators do not show clear sell signals, then this may be a wash trading tactic by the major player, aimed at scaring away investors who do not conduct comprehensive technical analysis.
