$BNB Practical example of TECHNICAL ANALYSIS on a CRYPTOCURRENCY
Practical example of TECHNICAL ANALYSIS on a popular CRYPTOCURRENCY, like Bitcoin (BTC). Imagine you are interested in determining whether it is a good time to buy or sell. Here I guide you step by step:
Step 1: Selection of the chart and time frame
Suppose you choose a 4-hour candlestick chart to get a short-term view.
Step 2: Observe the general trend
Looking at the chart, you notice that in the past weeks, the price has been in an uptrend, forming higher highs and higher lows.
Step 3: Pattern identification
Suddenly, you see that the price forms a double top pattern, which may indicate a possible reversal to the downside.
Step 4: Add technical indicators
Moving Average (MA of 20 periods): The moving average line is below the price, confirming the uptrend.
RSI (Relative Strength Index): It is at 70, indicating that the asset is in overbought territory. This may suggest that the price could correct soon.
MACD: The MACD line crosses below the signal line, another signal of a possible trend change to the downside.
Step 5: Key levels (supports and resistances)
You found that the price has struggled to break above $45,000 (resistance).
The nearest support is at $42,000, where the price has bounced multiple times.
Step 6: Volume
The volume in the last candles has increased in the formation of the double top, reinforcing the possibility of a reversal.
Conclusion of the example:
Given that the RSI is overbought, the MACD shows a reversal signal, and a double top is forming with increased volume, you might consider that there is a signal that the price could drop soon. If you are in a long position, it may be time to take profits or set a stop-loss in case the price falls.
TECHNICAL ANALYSIS is not infallible, and it is always advisable to combine it with other analyses and manage risk well.
