Hello everyone, this article is purely technical sharing. It simply talks about how to grasp and find support and resistance levels. I hope it will be helpful to friends in the square in the trading process.

In the investment process, faced with the unpredictable market fluctuations of currency prices, professional analysts usually give one or two support points and pressure points. Analyzing the short-term and long-term pressure points and support points of currency prices can help investors have a clear judgment on the market trend and facilitate investors to make better decisions in later operations.

Many investors may nod in agreement with this, but when it comes to specifically analyzing what the support and resistance points are, investors may feel confused. Below, I will detail how to accurately identify support and resistance points.

The meaning of support and resistance levels

  • Support level
    When the price of a cryptocurrency falls to a certain level and then stops falling or rebounds, this level is called the support level. It reflects the buying power of the market at that level.

  • Resistance level
    When the price of a cryptocurrency rises to a certain level and then faces resistance or falls back, this level is called the resistance level. It reflects the selling pressure of the market at that level.

  • The mutual transformation of support and resistance
    Once the price breaks through a certain resistance level, that resistance level may transform into a new support level; conversely, when the price falls below a certain support level, that support level may become a new resistance level.

How to find support and resistance levels

The following methods can help investors identify support and resistance levels:

1. Box range method

When the price of a cryptocurrency oscillates within a certain range for a long time, forming a box range:

  • The top of the box is an effective resistance level.

  • The bottom of the box is a strong support level.
    If the price breaks through the box, it may usher in a trend-following fluctuation, with the amplitude typically not less than the height of the box. The longer the oscillation period, the higher the reliability of support and resistance.

2. Multiple test point method

A certain level is tested multiple times during an upward or downward process:

  • If the price rebounds after multiple dips to a certain level, that level is considered an effective support level.

  • If the price falls back after multiple rises to a certain level, that level is considered an effective resistance level.
    This method is particularly suitable for small range consolidations in the cryptocurrency market, as the fluctuations after a breakout are often significant, providing considerable profit potential.

3. Technical indicator method

  • K-line chart analysis
    Observe the 1-hour, 4-hour, and daily charts:

    • The top, middle, and bottom of a large bullish candle are often used as references for support or resistance.

    • The support level of the daily K-line is more valuable for reference.

  • Bollinger Band analysis

    • The upper Bollinger Band on the daily chart often serves as a recent resistance level.

    • The lower Bollinger Band on the daily chart serves as a short-term support level.
      Combining Bollinger Bands from different time frames makes it easier to determine the strength of support and resistance, especially recommended for use with the 4-hour chart.

  • Moving average analysis
    Observe moving averages such as MA5, MA10, MA30, and MA120:

    • In an upward trend, the price of a cryptocurrency usually retraces to MA5 or MA10 for support.

    • In the weekly K-line, MA30 is an important support level after a sharp decline.

    • Similarly, in a downward trend, moving averages can also serve as resistance references.

Summary

Mastering the analysis methods for support and resistance levels can effectively enhance judgment and execution in trading.

  • Use the box range to find key levels.

  • Focus on the support and resistance formed by points that have been tested multiple times.

  • Proficient use of technical indicators such as K-lines, Bollinger Bands, and moving averages to assist in judgment.

I hope this sharing can provide practical guidance for everyone in a bull market, helping every investor seize opportunities and make wiser decisions!