So, we have found the direction and we have identified support and resistance… Now, where the heck is this going long-term? Introducing channels.

Time to be honest, once again. I really struggle with placing channels whilst trading. Cryptocurrency, unlike the stock market, doesn’t really seem to move in traditional channels.

That being said though it is always good to try and use them. It’s better to have some idea of long-term predicted movement rather than placing a trade and just hoping.

Using previous support and resistance lines we can figure out roughly where we consider the bottom of a channel will be (buy zone) and the top of the channel could be (sell zone).

I tend to trade only on the daily chart. This I find is less stressful than trading any lower time frames and also allows me to observe the movements more accurately.

Bitcoin has just completed a perfect climb up to $10,400 and has ended a trading trend that was very easy to follow.

Let me explain:

** Click on image to expand **

Bitcoin entered this new long-term channel in October.

Shortly after it’s move down the price at the end of October spiked to create the top of the channel (resistance).

It had bounced off the lower $6,400 point twice creating a support. (Double bottom).

The recent upwards trend has seen Bitcoin travel back up to $10,400 again where it has been rejected.

This confirms the top of the channel. (Double top). As expected the price is now falling.

The price could now possibly head back down to the $6,400 region to test the lower area of support again.

If the indicators of RSI and MACD start to show a turn around the $6,700 to $6,400 area this is where I would then start to look at buying back in.

Interestingly around late December just after the ‘double bottom’ the MACD lines started to head back up.

There wasn’t a big gap between the MACD line and the signal line, which indicated that this move up was going to be a gradual one, rather than a pump and dump.

The best entry point for this move up would of been around $7,000. This area created the first point for the upwards channel, as shown here:

** Click on image to expand **

At around $8,466 there was a small retrace, which gave a second point for the top of the ascending channel.

** Click on image to expand **

From here the MACD indicator was still showing a rise in price.

Shortly after the next rise there was a bigger retrace, which confirmed the lower point of the channel. This then allowed for 2 trend lines either side to be placed.

Anyone who bought at $7,000 would be getting quite excited.

Most take profits and closing of positions would of been around $10,300.

The end of the channel has now broken downwards and, as you can see from the MACD indicator, this looks like a move back down.

Now the downwards movement has started it will be the same to find the next channel down.

There will be rises and dips, it never just falls straight down. This will give the top and bottom of the new channel.

It’s a matter of watching and waiting for the breakout and the directional change of the price going back up again.

There you have it a brief into into channels. Wait… There’s more:

How to use ‘Waves’

How to use ‘FIBS’ – Fibonacci Retracements

How I use ‘FIB Extension’ – Fibonacci Extension

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