Bitcoin key levels overview; identifying major reversal points
In this simple idea i wanted to go over my longer term Support & Resistance levels as well as explain some of the concepts behind identification and use of these levels.
I am using the monthly chart to keep it simple, as well as to use a a reference point in the future to look back at how Bitcoin has responded to these levels previously as a learning experience. I am also using the BLX chart which provides a historic reference point for Bitcoin data as other widely used charts do not have the full price data.
From the BNC Website: BNC has developed the Bitcoin Liquid Index (BLX) to meet the marketplace requirement for a single, reliable and fair USD price for Bitcoin — based on live real-world trading activity. The BLX captures a comprehensive, global sample of liquidity on the highest volume and quality exchanges.
In this chart i am using 3 main techniques to identify these key areas where price has a potential to reverse from:
1. Horizontal Support & Resistance
2. Order Zones (Orderblocks, Supply & Demand Zones)
3. Fibonacci Retracements & Extensions
4. Psychological Support & Resistance (Historic values, 1000,5000,10000,20000,10000 etc)
Why are these techniques useful?
Well first, let me show you two previous charts on Bitcoin.
Scroll down, linked at the bottom of this idea, are two charts labelled "#Bitcoin: Current Monthly Key Levels" & "#Bitcoin: Currently Key Daily Levels" open both in a new tab, press play on each respective idea, notice how the price reacts to these levels I have defined on my charts?
That is the whole idea behind these concepts, we are basically making a map on our chart so that in the future when price revisits these historic areas we know where on the chart the price has a higher likelihood of volatile movements from. Usually when the price breaches one Support or Resistance area it can have a high likelihood of propelling towards the next like a magnet.
The 4 techniques explained:
1. Horizontal Support & Resistance
For those who are new to Technical Analysis; "Support" is a area on the chart price and demand (buying pressure) increases from, with "Resistance" being the opposite, with price decreasing and sell orders (Supply of asset) increasing from the latter.
When price reacts to the same area multiple times, it can form potential horizontal Support and Resistance areas, the Horizontal Line Tool (Alt+H) is used to mark this point on the chart.
It takes two touches to draw a horizontal trendline, with the 3rd reaction being the confirmation touch. On the higher timeframe charts such as the Monthly, Weekly & Daily these horizontal areas can become quite important.
2. Order Zones
Supply/Demand Zones & Order blocks can be small “pauses” or turning points in the market before major moves.The consolidation before the “thrust” can be referred to as the “base” and is a form of psychological Support & Resistance.
Order zones are a way of marking on the chart historically significant areas where price had strong reactions to and order density was strong.The price tends to come back to these areas and have strong reactions, the Order Zones act as a form of Support & Resistance.
Click the below image to understand Order Zones:
3. Fibonacci Retracements & Extensions
The Fibonacci tool is usually drawn from one key swing point to another - and gives us potential key levels to watch. It is quite common for the price to come up to the 0.618 Fibonacci and decrease in value, rejecting from there, with the latter being a bounce from the 0.382 Fibonacci level.
The Fibonacci tool is basically a mathematical equation that gives us important areas marked as lines on the chart, it is common for the price to reach these areas before reversing in the other direction, or piercing through them and confirming "Support" before continuing to the next Fibonacci level.
We drag the Fibonacci Retracement tool from different major swing high to swing low points, then double click on it to add our Extension levels.
Popular extension levels used are 1.272, 1.382 & 1.618, and multipliers such as 2.618, 3.618, 4.618.
Popular Retracement levels are 0.382, 0.5 & 0.618.
-Price often retraces to the 0.382 level before moving upwards
-Price often retraces to the 0.618 level before moving downwards
-Price often has a thrust towards the 1.272 or -0.0272 levels before a rejection occurs
The .618 Fibonacci ratio is referred to as the "Golden Ratio"
There is a special relationship between the Golden Ratio and Fibonacci Numbers (0, 1, 1, 2, 3, 5, 8, 13, 21, ... etc, each number is the sum of the two numbers before it).
So, just like we naturally get seven arms when we use 0.142857 (1/7), we tend to get Fibonacci Numbers when we use the Golden Ratio (.618, 1.618 etc) and traders are drawn towards these areas.
4. Psychological Support & Resistance
If you look at the Bitcoin historic chart, you can often see the price has pretty strong reactions to significant psychological numbers such as 1000,10000,20000 etc. So we mark these significant areas on our chart as subconsciously many people tend to pay more attention or get more excited when the price reaches these areas.
So now you have a base understanding of the concepts on the chart, and you can save this idea to reference in the future.
You can even click the little horn icon at the bottom right, before you click into the main idea, and add these areas to your own charts for future reference. You can also use the price scale on the right axis and bottom axis to zoom out the chart, as there are more levels above out of the current field of vision.
I will be returning to this idea in the future and analysing how Bitcoin reacts to these price areas ( if we ever do reach them again ;P ).
At the time of posting, Bitcoin is attempting to push through the psychological $40,000 mark, with 15 hours left until the next Weekly & Daily close, and 21 days remaining until the next Monthly close.
A confirmed Weekly close above the $40,000 region may be a potential sign that $50,000 is near while a failure to close underneath this area can show the potential of profit taking occurring.
We cant help but notice a "confluence" of different areas around the $30,000-$28,000 USD region which could potentially become the next Support area if the sellers regain control of the market in the short term.
If you found the idea informative then support us by liking & commenting thank you!
I am using the monthly chart to keep it simple, as well as to use a a reference point in the future to look back at how Bitcoin has responded to these levels previously as a learning experience. I am also using the BLX chart which provides a historic reference point for Bitcoin data as other widely used charts do not have the full price data.
From the BNC Website: BNC has developed the Bitcoin Liquid Index (BLX) to meet the marketplace requirement for a single, reliable and fair USD price for Bitcoin — based on live real-world trading activity. The BLX captures a comprehensive, global sample of liquidity on the highest volume and quality exchanges.
In this chart i am using 3 main techniques to identify these key areas where price has a potential to reverse from:
1. Horizontal Support & Resistance
2. Order Zones (Orderblocks, Supply & Demand Zones)
3. Fibonacci Retracements & Extensions
4. Psychological Support & Resistance (Historic values, 1000,5000,10000,20000,10000 etc)
Why are these techniques useful?
Well first, let me show you two previous charts on Bitcoin.
Scroll down, linked at the bottom of this idea, are two charts labelled "#Bitcoin: Current Monthly Key Levels" & "#Bitcoin: Currently Key Daily Levels" open both in a new tab, press play on each respective idea, notice how the price reacts to these levels I have defined on my charts?
That is the whole idea behind these concepts, we are basically making a map on our chart so that in the future when price revisits these historic areas we know where on the chart the price has a higher likelihood of volatile movements from. Usually when the price breaches one Support or Resistance area it can have a high likelihood of propelling towards the next like a magnet.
The 4 techniques explained:
1. Horizontal Support & Resistance
For those who are new to Technical Analysis; "Support" is a area on the chart price and demand (buying pressure) increases from, with "Resistance" being the opposite, with price decreasing and sell orders (Supply of asset) increasing from the latter.
When price reacts to the same area multiple times, it can form potential horizontal Support and Resistance areas, the Horizontal Line Tool (Alt+H) is used to mark this point on the chart.
It takes two touches to draw a horizontal trendline, with the 3rd reaction being the confirmation touch. On the higher timeframe charts such as the Monthly, Weekly & Daily these horizontal areas can become quite important.
2. Order Zones
Supply/Demand Zones & Order blocks can be small “pauses” or turning points in the market before major moves.The consolidation before the “thrust” can be referred to as the “base” and is a form of psychological Support & Resistance.
Order zones are a way of marking on the chart historically significant areas where price had strong reactions to and order density was strong.The price tends to come back to these areas and have strong reactions, the Order Zones act as a form of Support & Resistance.
Click the below image to understand Order Zones:
3. Fibonacci Retracements & Extensions
The Fibonacci tool is usually drawn from one key swing point to another - and gives us potential key levels to watch. It is quite common for the price to come up to the 0.618 Fibonacci and decrease in value, rejecting from there, with the latter being a bounce from the 0.382 Fibonacci level.
The Fibonacci tool is basically a mathematical equation that gives us important areas marked as lines on the chart, it is common for the price to reach these areas before reversing in the other direction, or piercing through them and confirming "Support" before continuing to the next Fibonacci level.
We drag the Fibonacci Retracement tool from different major swing high to swing low points, then double click on it to add our Extension levels.
Popular extension levels used are 1.272, 1.382 & 1.618, and multipliers such as 2.618, 3.618, 4.618.
Popular Retracement levels are 0.382, 0.5 & 0.618.
-Price often retraces to the 0.382 level before moving upwards
-Price often retraces to the 0.618 level before moving downwards
-Price often has a thrust towards the 1.272 or -0.0272 levels before a rejection occurs
The .618 Fibonacci ratio is referred to as the "Golden Ratio"
There is a special relationship between the Golden Ratio and Fibonacci Numbers (0, 1, 1, 2, 3, 5, 8, 13, 21, ... etc, each number is the sum of the two numbers before it).
So, just like we naturally get seven arms when we use 0.142857 (1/7), we tend to get Fibonacci Numbers when we use the Golden Ratio (.618, 1.618 etc) and traders are drawn towards these areas.
4. Psychological Support & Resistance
If you look at the Bitcoin historic chart, you can often see the price has pretty strong reactions to significant psychological numbers such as 1000,10000,20000 etc. So we mark these significant areas on our chart as subconsciously many people tend to pay more attention or get more excited when the price reaches these areas.
So now you have a base understanding of the concepts on the chart, and you can save this idea to reference in the future.
You can even click the little horn icon at the bottom right, before you click into the main idea, and add these areas to your own charts for future reference. You can also use the price scale on the right axis and bottom axis to zoom out the chart, as there are more levels above out of the current field of vision.
I will be returning to this idea in the future and analysing how Bitcoin reacts to these price areas ( if we ever do reach them again ;P ).
At the time of posting, Bitcoin is attempting to push through the psychological $40,000 mark, with 15 hours left until the next Weekly & Daily close, and 21 days remaining until the next Monthly close.
A confirmed Weekly close above the $40,000 region may be a potential sign that $50,000 is near while a failure to close underneath this area can show the potential of profit taking occurring.
We cant help but notice a "confluence" of different areas around the $30,000-$28,000 USD region which could potentially become the next Support area if the sellers regain control of the market in the short term.
If you found the idea informative then support us by liking & commenting thank you!
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