Good Day, All! Hope this post finds you well.
I have recently been posting daily updates on the price action of Bitcoin and figured I should explain my technical analysis. I would also like to give you a perspective of Bitcoin through my eyes.
Lets dig into the current Bitcoin daily chart and learn about my indicators and why I choose to use them. By doing so, you as a reader, can make your own informed decisions when buying and selling.
One of the first and most simplest indicators to understand are the moving averages.
- 20 period moving average (light purple)
a) This is the average closing price over the last 20 candles. - 50 period moving average (cyan)
a) This is the average closing price over the last 50 candles. - 200 period moving average (dark purple)
a) This is the average closing price over the last 200 candles.
Moving averages can act as current support and resistance. To a certain degree they can dictate whether the current price is "fair". For example, if current price is below all three moving averages, then it could be considered "fair" or "good price" barring no negative news or fundamentals.
The next two indicators are my favorite ones to analyze. These would be considered more of a forecasting indicator as they extend out to future points on the chart.
- Ichimoku Cloud (red/green)
a) The cloud is formed based on calculations of the previous price action. It has been shown to be a very good support/resistance level. Simply buy if price goes above the cloud and sell when price goes below the cloud. - Fibonacci Pivot Points (white lines)
a) These are support and resistance levels based on the pivot point that is established every so many periods.
Below the chart are 2 other indicators:
- MACD (cyan and light purple lines)
a) The two lines are also based on moving averages. When the MACD line (light purple) crosses the signal line (cyan), then it indicates a possible buy or sell. - RSI (light purple line with shaded area)
a) This indicator will illustrate whether a pair is currently oversold or overbought whether it falls below or rises above the dotted lines.
Putting It All Together
Here we will discuss how these indicators can be used in tandem to develop a bias and opinion.
Let us take another look at the current daily chart for bitcoin.
You will notice that price is below everything except for the 200 day moving average. We are not currently oversold and the MACD is currently indicating to sell. This would result in a pretty bearish outlook for Bitcoin. I believe it would be safe to say that current price is "fair" or at a "good value" based on the previous price action. I put those words in quotations because you have to remember that these indicators are all relative and based on previous price action.
In order to recover from this bearish bias, then price must climb higher and break through some of the moving averages and pivot points. Lastly, breaking through the cloud would indicate a bullish bias and outlook. More and more buyers come to the market as we break through these resistance levels. The more buyers, the higher price goes, the easier it is to break through resistance levels.
NOT ONE PERSON ON THIS EARTH KNOWS WHERE PRICE IS GOING TO GO. THERE ARE NO 100% GUARANTEES. As proof, you can see here that I thought $11,400 could've been a floor about a week ago.
It is imperative to understand that odds are always at play and can be utilized efficiently and effectively to be successful in any market. A lot of people trying to make money in the markets find themselves buying in at the top and selling at the bottom. The odds are currently not in your favor if you're buying bitcoin right now. There is an overwhelming amount of resistance that price would need to break through to become more inviting to more buyers.
One of the reasons why many people like to buy once price breaks above the cloud is because the odds of further increase are in your favor. Again, THIS WILL NOT GUARANTEE THAT PRICES CONTINUES TO RISE, but there is good reason to believe that it will.
I invite you to ask questions and continue to follow me. Navigating these markets alone is extremely hard.
If you find my analysis useful, then please follow my page and ask questions or leave comments. I would be more than happy to assist with ANY questions or concerns that you have.
LEGAL DISCLAIMER
The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.