If traders had a crystal ball, their biggest wish would be to know how to buy XRP at the bottoms. This is especially relevant in the crypto industry, where the mantra remains: 'When moon?' Translation: 'Are we finally at the bottom?'
First, note: some of the technical analysis tools and methods discussed here may differ from widely accepted notions. Why? Because, like in any other field, trading theories and best practices evolve. It may take years for these updated practices to reach retail traders from professionals. Sometimes even professionals lag in implementing these changes!
In this article, we will explore the anatomy of a market bottom using XRP, one of the most popular cryptocurrencies.
First of all
News is anecdotal.
It's a polite way of saying that 'news doesn't matter'. If you ever aspire to earn professional certifications like CMT (Chartered Market Technician) or CFTe (Certified Financial Technician), you will delve into works like 'Behavioral Investing' by James Montier that examine the impact of news on markets.
In short? News only matters when the price changes. If the price does not react significantly, the news is irrelevant. People just turn to the news as an explanation or reason for something that has happened.
If we want to buy XRP at the bottoms, there are several tools that can help properly identify and time the purchase. The two tools I will focus on are the RSI and Stocktwits social sentiment data.
RSI: It’s about context, not blind levels
If you want to buy XRP at the bottoms, the RSI can help. Note: you have likely been using the RSI incorrectly — or at least, not as effectively as you could. Don’t be discouraged. The way professionals interpret the RSI changed nearly 20 years ago… but again, even professionals sometimes take a long time to adapt.
The RSI (Relative Strength Index) is one of the most well-known and frequently used indicators among traders.
In 1978, J. Welles Wilder introduced the RSI. At that time, it was revolutionary. Why? Because the RSI thrives in volatile markets, exactly what investors experienced during Wilder's era. Updated use of RSI
In 2008, Connie Brown – undoubtedly one of the most outstanding analysts and traders in the world – transformed the understanding of the RSI in her book 'Technical Analysis for Professional Traders' (a must-read for certifications such as CMT and CFTe).
Without going into details, the RSI should now be considered as something that is either in a bull market or in a bear market. And while each tool and timeframe is slightly different, typical OB (overbought) and OS (oversold) levels are as follows:
Bull market:
OB 1 – 80
OB 2 – 90
OS 1 – 50
OS 2 – 40
Bear market:
OB 1 – 65
OB 2 – 55
OS 1 – 30
OS 2 – 20
Example: daily chart of XRP from May 2019 to June 2020
The RSI level of 65, particularly during this period, acted as a relatively stable resistance source, while 30 and 20 acted as support.
But how to determine if the RSI is bullish or bearish? Simply – overlay these levels, and the one that aligns better with the latest movements is the correct one.
Looking now at the weekly chart of XRP, my interpretation is bullish as XRP holds the OS level at 50 as support. Social sentiment on Stocktwits: Is this a secret code?
Stocktwits social sentiment data is another powerful tool when trying to buy XRP at the bottoms. Stocktwits captures insights exclusively from traders and investors — no random chatter from general social media.
Here is what I find particularly valuable:
If the volume of messages is increasing but mood remains stable or declines, I'm looking for bullish setups. People often talk about something before actually doing it.
November 2024 illustrates this perfectly:
Week of October 27, 1014: Mood 24, Volume 30
Next week: Mood decreases to 22, Volume slightly increases to 32
This divergence between mood and volume typically signals a future bullish momentum. The latest mood activity regarding XRP
Currently, there is an even more dramatic divergence:
Volume of messages (orange) is stable/slightly increasing
Mood is falling despite XRP price rising.
Another key pattern: when price stabilizes and mood consistently declines, it indicates that traders are late in recognizing the market direction. For me, this is not just a signal to join — it is a signal to take a favorable position before everyone else rushes in.
In short, defining market days is not about being first; it's about understanding the context, using updated analysis methods, and deciphering the nuances of market sentiment. This is the anatomy of a bottom — the XRP edition.#BinanceSquare #Write2Earn #crypto #Binance #xrp $XRP