Trading-Guru

Three Alternatives to Charting Uncharted Territory

BITSTAMP:BTCUSD   Bitcoin / U.S. Dollar
Within technical analysis you use indicators and price action to determine what the next most likely move of an asset is going to be.

I love indicators, but I love price action even more. It works for me, it's simple, it's clean and there isn't too much hocus pocus.

The downside with price action though is that you need to be able to observe price action in similar areas to the one you are trading in now.

When a price moves up like crazy such as what bitcoin did, you won't see anything on the chart that is comparable or that you can relate to.

In that case, you have to be creative. You can either go back in time, and find comparable prices way back. The downside here is that the further back you go, the less predictive that action is.

You can also chart based on psychological support and resistance . Think creatively about at which points the price is likely to bounce and use those instead.

And finally you can use other price action indicators such as the Fibonacci retracement .

In this analysis I show all of these. Let's walk through them one by one.

First of all, you can clearly see the Fibonacci retracement . I used the most recent low, and the most recent high to draw the fib. Immediately, a few things stand out. We see the beautiful bounce around .236, a level that usually only matters in very bullish set-ups as the price often breaks right through. Also we see that there is resistance at the .382 level and at the end of the golden pocket.

You could use that information to determine a good entry for a long and estimate a reversal point.

Then, I also looked at price action way, way back. We see a very interesting horizontal zone coming from July '19. There was also another horizontal zone that didn't fit on the chart anymore around the $17,200 from January '18. You can use the upper one to mark an area where you can expect resistance, and the lower one as an area where you can expect support.

And then finally you have psychological levels. I highlighted one very important one here at the $16,000 level as I expect we'll be mostly looking at the more bullish levels soon anyway. The price beautifully bounced around that level and I expect it can happen again. The price might get rejected and reverse when it's moving upwards around that level, or break through and use a S/R flip to find support again near that same level.

As for my expectations on price, I expect a form of consolidation now where BTC will not be the star of the show for a while, but instead we will focus on great Alt opportunities.

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- Trading Guru

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Disclaimer!
This post does not provide financial advice. It is for educational purposes only!

Comment: In case you hadn't seen it already, I also continued this idea by looking at it from a bull flag point of view. This is a slightly more bullish scenario where the price should eventually continue its uptrend after breaking out of the parallel descending channel.

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