Cryptocurrency Analysis: The Importance of Support and Resistance
After 20 years of trading, it amazes me that folks still don't technical analysis seriously.
Many still write it off as useless, and full of flaws.
But as we’ve proven time and time again, such analysis can help pinpoint exact spots where trader fear and greed are way out of hand while leading us to great opportunity.
Two of the most essential technical patterns to master are support and resistance levels.
Support levels can alert you to where selling pressure may be fading.
Just as resistance levels can alert you to when bullish momentum may be fading.
When prices are falling to the floor, support represents the moment when buying begins to overwhelm selling and prices begin to bounce back. Conversely, when prices move to the ceiling, resistance is the point where selling begins to overwhelm buying and price increases begin to reverse.
The more times a stock bounce off support and resistance, the stronger these support and resistance lines become for technical analysis. If something repeats itself again and again, it becomes a stronger indicator of potential pivots at high or low points on a chart.
Look at NEM (XEM) for example.
Between April and May 2018, failure at double top resistance, following a run from $25 cents to nearly 45 cents told us it was time to take our money off the table and move on. As we can clearly see that point of resistance would give way to a drop from 45 cents to 30 cents.
Learn How to Spot Unique and Predictable Patterns in Cryptos
By being aware of that technical resistance, we could have secured a win before a drop.
By mid-May 2018, we had another opportunity to make money from this coin after it caught double bottom support at 30 cents, and began to pivot higher. In fact, if you had caught the double bottom support line in early April 2018, you could have bought XEM at nearly 20 cents before it ran to 45 cents.
We can see it with Ethereum (ETH), too.
Between late 2017 and early 2018, the coin tested double bottom support around $600 and bounced higher each time. Also, in early 2018, ETH found heavy resistance at $1,400 and pulled back once traders realized they couldn’t push it any higher at the time.
Even if you’re not a fan of technical analysis, at least refer to it.
If not, you’re truly doing yourself and your portfolio a great disservice by ignoring spots where you should be buying and selling.
Bonus Report: There are several patterns that can pintpoint the likely price movement of cryptos. Click Here to get the full report on how to spot these patterns.