I have not posted in a awhile as I have been playing around with new trading ideas and testing them out before I share my thoughts. I saw some traders online using the Heikin-Ashi candle setup and it intrigued me. The candles are basically averages of the open/close/high/low's of the previous candles. The benefit of using this candle setup is to better identify trends. On a simple level if you see a long line of green candles that get larger that means the bullish trend is strong and rising. As the candles get smaller that is a sign momentum may be fading and the trend will change. Same goes for red candles to signify a bearish trend which is good if your shorting the market or know when you want to get out.
You can still use support and resistance with these candles though you need to pay more attention to the wicks when doing so. I am a big fan of averages so since this candle setup promotes this I have adopted its use. I am still researching and playing with trade setups but so far the past week I have done pretty well on most of my trades.
Now let us take a look at Bitcoin. With Heikin Ashi the wicks are important because it will be an indicator of the possibility of a trend change. IF you see no lower wick and a large upper wick, strong trend. If the upper wick starts to get smaller, means the strength is fading. Once you start to see wicks on top and bottom a stronger indicator that the trend changes and when you get a red candle with a larger lower wick, that's a strong bearish sentiment.
With this we see Bitcoin has been gaining strength the past week but todays candle has a much shorter upper wick which is the first sign of the decline of the trend. The Stoch is also in the oversold area but the K & D lines have not yet crossed. Volume is starting to also decline so we may be seeing a correction soon. If so it may meet support above the 50 period moving average which is at around 8300 and trending down still, though the 10 period MA is still trending above the 20 period so we are still in a short term bull trend.
I would expect some pull back between 8130-8300 for the last zone of support. If it fails, i would look for support at the 20 period MA between 7500-7800.
You can still use support and resistance with these candles though you need to pay more attention to the wicks when doing so. I am a big fan of averages so since this candle setup promotes this I have adopted its use. I am still researching and playing with trade setups but so far the past week I have done pretty well on most of my trades.
Now let us take a look at Bitcoin. With Heikin Ashi the wicks are important because it will be an indicator of the possibility of a trend change. IF you see no lower wick and a large upper wick, strong trend. If the upper wick starts to get smaller, means the strength is fading. Once you start to see wicks on top and bottom a stronger indicator that the trend changes and when you get a red candle with a larger lower wick, that's a strong bearish sentiment.
With this we see Bitcoin has been gaining strength the past week but todays candle has a much shorter upper wick which is the first sign of the decline of the trend. The Stoch is also in the oversold area but the K & D lines have not yet crossed. Volume is starting to also decline so we may be seeing a correction soon. If so it may meet support above the 50 period moving average which is at around 8300 and trending down still, though the 10 period MA is still trending above the 20 period so we are still in a short term bull trend.
I would expect some pull back between 8130-8300 for the last zone of support. If it fails, i would look for support at the 20 period MA between 7500-7800.