Technical Analysis 101 (Part 1): Candlesticks, Support/Resistance, & Trendlines


Hey guys, I’m Angelo & welcome back to Crypto
Coin Consultants. Technical analysis is one of the most powerful
methods of predicting market price & direction in the world of cryptocurrency. This will be the first video in a multi-part
series where I’ll teach you the basics of technical analysis. The key behind this is that they’re the
BASICS. There are other alternatives & methods you
can use, but my goal with these videos is to provide just enough information for you
to get started to successfully trade. For those who want more in-depth information,
investopedia.com will be your best friend for this. With every tool, indicator, or pattern I show
you, I’ll first introduce the concept, followed by a live, onscreen demonstration on how to
actually apply the concept. Let’s get started! The first & most common thing you’ll see
when opening up a graph are green & red bars, called Japanese candlesticks. These candlesticks indicate the direction
the price moved within a given time period; so if we wanna look at the 1-day charts, each
candlestick represents the price movement for one entire day. If we look at the body of a green candlestick
(and ignore the lines extending above & below it), we’ll see that the bottom line indicates
the price that that coin opened for that day, while the top line tells us the price the
coin closed at that same day. The lines extending outwards are called “wicks,”
and indicate both the lowest & highest prices the coin sold for within that 1-day period. The only difference between a green candlestick
& a red candlestick is that a red candlestick indicates that the coin’s price closed below
its opening price; meaning price moved downwards for that day. Now let’s put this into action. Looking at Bitcoin’s 1-day graph–which
you can see I’ve selected here by clicking on 1 day–you’ll see the prices for the
open, high, low, and close represented by O, H, L, and C, respectively. Hovering over to January 5th, 2018, we can
see that Bitcoin opened at $15,143 dollars for the day, at some point dropped down to
$14,810 and reached as high as $17,200 during that same day, and finally closed at $16,928. Three days later on January 8th, 2018, Bitcoin
opened at $16,173, reached as high as $16,300, dropped all the way down to $13,900, and finally
closed at just under $15,000. The next thing I’d like to discuss is what
you’ll hear referred to as support & resistance. These are price levels in which the price
of a coin is prevented from being pushed further upwards or downwards. Support–also referred to as a floor–is the
point at which a coin has repeatedly dropped to a certain price point before being bought
up again. Resistance–also known as a ceiling–is the
opposite; the point at which a coin has repeatedly gone up & touched before being pushed down
again. Keep in mind that support & resistance levels
are merely “zones,” meaning they act as a general area in which price is predicted
to bounce off, rather than an exact price. You can use support & resistance levels to
your advantage by buying low when a price reaches an expected support level, then selling
it off when it hits its resistance. One thing to note too is that when price breaks
a certain support level, you’ll oftentimes see that same, former support level act as
resistance later on down the road, and vice versa. Now let’s go back to the charts so you can
see exactly what I’m talking about. Looking at Ether’s 6-hour chart from mid
to late December of 2017, we’ll see that the price of Ether was repeatedly facing resistance
around $750. With the exception of December 18th, 2017,
every time it hit resistance, price went back down until finally on January 1st, 2018 it
broke through. You can also see that that same $750-ceiling
later on acted as an important level of support here, here, and here, in which price moved
back up after touching it. The last concept I’d like to cover in this
video is a tool called a trendline. As its name implies, trendlines show the general
trend of a particular coin’s price. A coin’s price trend can move in one of
three different directions: up, down, or sideways. You can think of trendlines as sort of dynamic
areas of support & resistance, which will make more sense once we look at the charts. Again, these are general areas (or zones)
of support & resistance, and are difficult to pin to an exact price. Some key things to note are that two touches
to a trendline form a speculative (or tentative) trendline, while three touches to a trendline
are a confirmed trendline. A touch is made distinct from another touch
when they’re separated & spaced out from one another, rather than clustered together
over the course of a smaller time frame. Thus, bigger time frames (like the 12-hour
or 1-day, for example) lead to more valid trend lines. The more times price touches a trendline,
the stronger or more powerful it’s considered to be. Longer trendlines are more powerful; meaning
the longer the trendline has been intact, the more likely you are to see this line get
respected, and for price to predictably bounce off it. But keep in mind that the more powerful the
trendline is, the more violent you’ll see price react once it does manage to break that
trend line. Going back to Bitcoin’s 1-day chart from
May through December of 2017, for example, we can draw a confirmed ceiling trendline
here. Note that price touched–and at times came
close to touching–the trendline more than three times. Late October/early November saw price test
it & break through, but it was suddenly pulled back down until it broke through again in
mid-November & reacted violently with an almost 200% increase in price over the course of
about a month. Alright guys, that wraps up episode one of
my new, multi-part technical analysis series. Stay tuned for the next video, where I’ll
be showing you even more TA tools you can add to your arsenal. Thanks for watching & feel free to ask questions
or make any requests in the comments section below…and before you go, don’t forget
to subscribe, hit the bell button to get notified of new video releases, & give this video a
nice thumbs up!

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