A price bounce in cryptocurrencies refers to a change in the direction of price movement after a period of up or down. In other words, it is the temporary reverse movement of the price before the general trend (either up or down) resumes.
Types of price bounce:
1. Bullish Reversal:
It occurs when the price is in a downtrend and then starts to go up.
• Example: After a currency falls in value, buyers start entering in large numbers, causing the price to rise.
2. Bearish Reversal:
It occurs when the price is in an uptrend and then starts to fall.
• Example: After a strong rise in price, sellers begin to pressure the market, causing the price to fall.
Reasons for price rebound:
1. Market Correction:
When prices are too high (overbought) or too low (oversold), the price returns to its normal levels.
2. News and Events:
Positive or negative news affects supply and demand.
3. Support and resistance points:
• If the price reaches a strong support level, it may bounce back up.
• If it reaches a strong resistance level, it may bounce back down.
4. Change in market sentiment:
• Entry of new investors.
• Change trading direction based on forecasts or technical signals.
How do you know there is a rebound?
• Using technical analysis:
1. RSI Indicator: If it breaks out of the “overbought” or “oversold” zone, there may be a bounce.
2. Fibonacci levels: Help identify potential price retracement areas.
3. Japanese candlesticks: such as reversal candles (Hammer, Shooting Star).
The difference between a bounce and a correction:
• Retracement: A temporary movement against the current trend, but usually short-term.
• Correction: A larger change in price that does not change the overall direction of the market.
