Does technical analysis work on bitcoin?

Does technical analysis work on bitcoin?

IX Investor Bulletin

Wednesday, 26 July 2017

 

** Why charting works…

** Gold at key technical level?

** Does charting work on bitcoin…

As I’m sure you know, technical analysis is the study of chart patterns.

Technical traders look at charts to figure out where the price of something is heading.

And as you’ll know if you’ve made a start with TA, charting does work. Understanding how price has behaved in the past really can help you predict where it’s going in the future.

It’s all about psychology and behaviour. See, a chart is a visual record of how price has moved over time. It records when buying sent the price up and when selling sent price lower.

That’s what ‘support’ and ‘resistance’ is all about. A support level is a price level where historically traders have bought. So technical traders mark that level on their chart. And often if price comes down to that level again, buyers come in and that sends the price up again.

Charting works well on popular markets. Take gold.

I don’t know about you, but I love to trade gold. It moves enough to make it worthwhile. But it’s not so volatile as to make it tricky and cause sleepless nights. (Well, not usually.)

So let’s look at a chart of gold. This is an hourly chart, so each of the green or red candlesticks represents a 60-minute period.

What do you see?

Chart: livecharts.co.uk

The first thing I see is that gold’s been trending up these past couple of weeks.

Not in the bigger picture. If you look at a daily or weekly chart, you’ll see that gold is trading within a sideways range. It’s up about 8% since the start of the year, but it’s been bouncing around between $1,200 and $1,290 since February.

But on the hourly chart, the trend is up. And right now, it’s at what seems like a pivotal level. That level is $1,247, right in the middle of that $90-range.

And see how that level has acted as support and resistance over the past six months. When the price breaks through that level, there is potential for a decent intraday move.

My bet is that technical gold day traders are looking for a break of $1,247 today to set up a move towards $1,250-$1,252. At the same time, a break down from this $1,247 level could set up a $1,236 downside objective.

Those are decent moves for the day trader – equivalent to 50-90 pip moves in forex. And that $1,247 level is significant on daily charts, too. A decent beak to the upside brings $1,260, $1,280 and $1,300 in as achievable targets over a period of a few days.

The point is, with these long established, heavily traded markets like gold, major currency pairs and stock market indices, charts can work well…

Traders have key levels marked out on their charts and they will have entry and exit orders based on those levels. And it’s those orders that create the supply and demand needed to drive market price action.

But what about newer markets – can charting work on those, too?

Of course, I’m talking about bitcoin and all those other cryptocurrencies everyone is rightly so excited about.

I’ve seen some guys trying to map out price targets for bitcoin. But I’m not so sure I’d be able to figure out a trade based on bitcoin charts and then sleep well at night.

I’m just not convinced there’s enough past price action… enough history… to be able to say with confidence that traders are likely to buy or sell at such and such a level.

People talk about $1,800 being an important level for bitcoin. And for sure, it has done well to support the price the last couple of times it went there, in May and earlier this month. Both times, bitcoin went on to rally some 60% within weeks of those lows.

So perhaps traders are using charts to time their bitcoin trades, the same way as any other market.

If so, what happens if $1,800 doesn’t hold the next time it’s tested (if indeed it is)? I guess that means other major ‘big round numbers’ like $1,500 and $1,000 will come into play as downside targets?

And by the same rationale, if chartists are looking at bitcoin, then the all-time high of $3,019 must be a very plausible target to the upside from here. And if reached, we can expect to see some resistance at that level as people take some profits off the table.

But if that level breaks… where’s it heading? $5,000? $10,000? $100,000 per coin (as Saxo Bank predicts over the next 10 years)?

Personally, I want to see more testing of key levels on bitcoin, ethereum and other cryptos before I’d be comfortable trading them on a technical basis. Let’s see how they behave around some of the levels in the months ahead…

Of course, if you’re simply looking to buy and hold for the long term, these levels aren’t so important.

Certainly if some of the big potential targets the experts are laying out come true!

Good trading,

 

Jack Haldane

 

 

 

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A wild week in cryptoland

In this week’s bulletin:

** A wild week in cryptoland…

** Don’t get burned in the next shake-out…

** Tune in to Round the Clock Trader…
Hi

If you’re holding bitcoin, ether, ripple or any other cryptocurrency, chances are you’ve had an exciting time of it lately.

These things have been throwing off some crazy moves. Bitcoin dropped almost 25% in a couple of days over the weekend. Some of the others even more.

But it’s all ok. The price has rebounded. The crypto craze is alive!
I must say, I’ve not been involved in bitcoin or any of the other cryptocurrencies yet. It’s not that I’m sceptical about them. I just don’t know enough to feel confident in putting my hard earned at risk in that pot.

But I’m seriously considering it. I’ve read some good stuff about cryptos and I reckon they’re here to say, in some form or other.

One thing, though… there’s an awful lot of bandwagon jumping going on! There are now over 900 cryptocurrencies. And people are launching new ones all the time.

To me, that really does smack of the kind of dodgy dealing that always crops up during a mania. People peddling worthless junk to hyped-up investors desperate to cash in on the next big thing.

So let’s be careful out there. There’s money to be made from cryptos. But there’s money to be lost too. Try and be on the right side of the trade.

Bitcoin and the rest may have recovered what they lost over last weekend. But there will be more shake-outs to come. And that means people will get burned.

For what it’s worth, my idea (if I decide to go in) will be to play with a small amount – and basically write it off. That way, I don’t get burned too badly if it goes belly-up. And if it goes well, I make some.

Meantime, I’ll save the bigger part of my trading pot for the markets I really understand… forex, stocks and commodities.

And if you haven’t a clue about what cryptocurrencies are… or you’d like to know more about them… I’ve some good news.

As you know, tomorrow is Round the Clock Trader and Simon’s lined up veteran trader, John Piper, who’s been making good money in the crypto space, to show us how he does it and how you can profit too.

John’s been trading for years and has a lot of fans of his simple-to-follow strategies for trading the markets. So if you’d like to hear his take on cryptocurrencies and how you can make money from them, register for this free event:

Register free for Round the Clock Trader- https://attendee.gotowebinar.com/rt/4116700557951945217 

John’s on at 2pm (BST) to talk cryptos.

But there’s plenty more Simon’s got lined up for tomorrow’s all-day event. So be sure to get your name down and tune in from 9am.

Check out the 12-speaker line-up you can dip in and out of during the day:

9.00am – Live Trading with Thiru Nagappan, Master the Markets
10.00am – How to find high-quality shares to create a worry-free portfolio – David Paul, VectorVest UK
11.00am – Catching the Big Moves in 20 minutes a Day – George Hallmey, Click Events
12.00pm – Live Review of FX and Stock Markets – Carol Harmer, charmertradingacademy.com
12.30pm – How to identify and connect with the best mentors – Peter Watson, Pelican Exchange
1.00pm – How to Analyse the Markets with Elliot Wave – Thierry Laduguie, e-yield.com
2.00pm – Crypto Currency Trading – John Piper
3.00pm – How to Trade the News… Effortlessly – Rob Colville, The Lazy Trader
4.00pm – Creating A Rock Solid Risk Management Strategy – Alistair Crooks, Traders Support Club
5.00pm – A Step By Step Plan To Eliminate The Gamble And Inconsistency In Your Trading – Bo Yoder
6.00pm – Day-trading strategies I use…every day! – Charlie Burton, Ezeetrader
7.00pm – Why We Are Not Made To Trade And What You Can Do About It! Dave Landry, Davelandry.com
8.00pm – How to identify trends and opportunities in aggressive option activity – Christian Fromhertz, Tribeca Trade Group

Plenty of big names there – Simon’s put together a great event once again. I reckon there’s something for everyone there. And if you’re keen to learn from experienced traders, I should try to stay on for the duration. You’ll get loads of great ideas.

The most important thing is to register for free now – then you’ll receive the link you need to watch the event tomorrow. Without registering, you’ll miss out.

Click here to get your name down now.
Good trading,

Jack Haldane

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