Our expanding educational series recently introduced you to three of the most common technical trading indicators in crypto: Trading Volume, the Relative Strength Index (RSI), and Moving Averages (MA).
Today we'll apply those same indicators to complete a high level technical analysis on Bitcoin's current price.
The trading volume of Bitcoin in the first quarter of 2019 is considerably lower than the volume seen in the second half of 2017 and the first half of 2018. This is not surprising as volume in periods of large price movements is higher than in times of market consolidation.
At the time of writing, we can observe a decline in volume (indicated by the white line) while the price is consolidating in the range between $3797 and $4129. A sharp price movement in either direction ending this consolidation is not unlikely.
BTC Relative Strength Index - RSI
When we look at the Relative Strength Index over the last five months, we can see that the RSI printed a significant low during the price decline in November 2018. We also mentioned in our previous article that in bear markets the oversold zone can be moved down to the 20 level. The RSI managed to breach that mark in November, a long term bullish signal.
In the chart below we added an auxiliary horizontal for the midpoint value of 50. Since the beginning of March, we have seen a general uptrend in price, accompanied by a consolidating RSI. The midpoint value of 50 acted as support (green arrows) for the RSI since it was breached in February.
BTC Moving Averages
The moving average is one of the most closely watched indicators of the last few weeks. When it comes to simple time based MA's, there's 2 key points to observe:
- Looking for the price crossing the MA
- Looking at crosses of moving averages calculated on the basis of different timeframes
The example below shows the 100 day MA (white) and the 50 day MA (green). Recently the Bitcoin price crossed both of these MAs. Additionally, the MA50 crossed the MA100. Shorter time periods cutting upwards of longer ones are a generally bullish signal.
The moving average can act as both support and resistance for the price. You can see how the MA100 acted as support for the price after it was breached. If the price manages to stay above the MA, this would be considered a bullish signal. If it breaks below the MA again, it would be a rather bearish one.
Confluence of Indicators
In isolation, most indicators don’t convey a lot of information. The basic indicators used in this article are used by a large number of traders, and the more people make use of an indicator, the more likely its signals are to be accurate.
As such, traders are usually looking for confluence between different indicators. So beyond the individual nuances, the more indicators that point in the same direction, the higher the likelihood of the indicated price movement to happen.
We hope this article helped you to better understand how volume, RSI, and MA's are applied to digital asset charts. While current BTC trading volume is not giving strong signals in either direction, the RSI is supported at the midpoint value of 50. The MA could be acting as support at current price levels while a break below would support a further BTC price decline. If price manages to stay above, further upward movements are likely.
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Disclaimer: contents of this article are for general market information and are not intended to serve as financial, investment, or any other type of advice