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Q&A: Can I trade bitcoin (and other cryptocurrencies) using technical analysis

Q- Question from one of our students: "I want to trade cryptocurrencies (Bitcoin, Ethereum, Ripple and IOTA), and would like to know if the candlestick and technical patterns can be used to analyze and trade them correctly. Thank you!"

A- Candlestick and technical patterns can be found and analyzed across all tradable equities (stocks, options, forex, commodities), including cryptocurrencies.

Cryptocurrencies are a recent financial phenomena. Still considered an abstract and difficult concept to understand for most people, governments, banks, and corporations are well aware of its importance in the future of global economies and financial markets

Despite their newness, cryptocurrency charts can be analyzed, just like any other trading securities, using traditional methods, such as candlestick analysis and technical analysis.

Let take a look at a couple of examples here:

  • Ethereum/Dollar
  • Bitcoin/Dollar

ETH/USD (Ethereum/Dollar) - Currently price 183.40

Currently in a downtrend. Price is trending inside the falling channel with price closing below the 8 EMA (orange line). The 50 SMA (blue line) is also keeping price down.

We could expect price to drop down to 159.45. If that support fails, it could move down to 131.01. If that fails as well, the next support area is the red line, the 200 SMA, currently at 111.80. And finally the bottom of the channel which could be as low as 83.

As long as price trades inside the falling channel, stay short.

On the other hand, if price breaks above the top of the falling channel, confirms the breakout, and starts moving higher, then go long. In that case we could look at the following targets: 241.51, 257.48, 283.00, and 320.63.

BTCUSD (Bitcoin/Dollar) - Currently price: 2686.47

Different scenario, it is currently in an uptrend.

Price is trending inside a rising channel, above the 50 SMA and the 8 EMA. If 2654.50 holds, price could move up to test the following resistance areas: 2825.00 & 2930.00. If resistance is broken, we could see 3132 & 3317 (basically the top of rising channel).

If the 8 EMA fails to hold support, price could come down to test the bottom of the middle channel (2570). If that fails as well, we could look at the following short targets: 2613, 2509 (and the 50 SMA) and 2400.

Good trading!


Trading Risk Disclaimer

All the information shared is provided for educational purposes only. Any trades placed upon reliance of SharperTrades, LLC are taken at your own risk for your own account. Past performance is no guarantee. While there is great potential for reward trading stocks, cryptos, commodities, options, forex and other trading securities, there is also substantial risk of loss. All trading operations involve high risks of losing your entire investment. You must therefore decide your own suitability to trade. Trading results can never be guaranteed. SharperTrades, LLC is not registered as an investment adviser with any federal or state regulatory agency. This is not an offer to buy or sell stocks, cryptos, forex, futures, options, commodity interests or any other trading securities.


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