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With Bitcoin and Ethereum prices climbing to record highs, things are looking up for the entire cryptocurrency market.

Bitcoin price doubled in less than 40 days after its decisive close above its previous all-time high at $20,000. Now that Ethereum has also closed above its last ATH, investors assume that it might do the same as BTC. 

Regardless of how one coin performs, an interesting observation is that both the most popular tokens have simultaneously turned bullish. 

This development has caused altcoins to surge willy nilly leading to an overall increase in most cryptocurrencies’ market value. Moreover, these digital assets are flashing similar bullish setups making higher highs every day.

Hence, taking advantage of this bull run is a no-brainer, so here are six technical analysis tips to make the most of it.

What are setups and how to identify them?

When looking at price charts to understand how a cryptocurrency’s market value behaves, it can be observed that multiple patterns or setups that repeat over various time frames develop frequently. Thus, these technical formations provide trading opportunities.

The most recurring chart patterns are channels, wedges, triangles, too and bottoms, and flags.

Chart Patterns

Chart Patterns

  1. Channels develop when the price starts trading in a range-bound manner between two parallel trendlines. All the channel patterns require the price to touch each trendline at least twice as distinct peaks or valleys.
    1. Ascending Channels
    2. Descending Channels
    3. Horizontal Channels
  2. Wedges are quite similar to the channels except, the trendlines converge, leading to a price squeeze. Wedges can also have trendlines that diverge or broaden. This setup’s identifier sees prices forming a set of higher highs and higher lows (in case of a rising wedge) or lower highs and lower lows (in case of a falling wedge).
    1. Rising Wedge
    2. Falling Wedge
  3. Triangles can be spotted when prices trade between two converging trendlines. As an identifier, the price must touch one trendline at least three times, the other at least twice, forming distinct valleys and peaks.
    1. Symmetrical Triangle
    2. Ascending Triangle
    3. Descending Triangle
  4. Top/Bottom Reversals signify the end or start of rallies and are followed by extreme price movements on the opposite side of the previous trend.
    1. Double/Triple top/bottom
    2. Adam and Even top/bottom
    3. Rounded bottom
  5. Flags are continuation patterns and lead to the further development of the previous trend. Prices tend to go through a strong breakout in either direction followed by a period of stagnation. Prices usually consolidate in a downward sloping channel after the initial burst for bull flags. In the case of bear flag patterns, the consolidation happens in an upward sloping channel. While both the flags and pennants are similar, the only distinction is the formation of channels as consolidation patterns in flags and symmetrical triangles in pennants.
    1. Bull/Bear Flag
    2. Bull/Bear Pennant

While there are plenty of chart patterns, these are the most commonly seen in the cryptocurrency market. 

Marking important areas

Marking out key levels or areas of interest is the next important step after identifying chart patterns. This step helps determine levels where cryptocurrencies might dip or face resistance to set up potential stop-loss or take-profit orders properly.

Price candles contain a lot of useful data. A red candle with a large wick above it shows the presence of strong sellers. Similarly, a green candle with a large lower wick represents immense buying pressure.

When considering the current state of the cryptocurrency market, marking out all-time highs is crucial. 

For instance, Bitcoin formed a local low on January 22, when it pierced through the yearly-open level at $28,999. The previous sell-off seen on January 11 was mitigated as buyers were able to hold prices at $30,261. 

A large bottom wick shows the presence of strong buyers at these price levels. Therefore, the price action between $30,261 and $28,880 is called a ‘liquidity pocket.’

BTC/USD 1-day chart

BTC/USD 1-day chart

The combination of the first and the second dip can be seen in the chart attached below as a horizontal trendline that crosses both price points can be drawn. Meanwhile, a descending trendline can be drawn around the swing highs.

BTC/USD 1-day chart

BTC/USD 1-day chart

Creating a Watchlist

The next important step is to add this chart to a list for constant monitoring. The best way to do this is by adding it to a “watchlist” on TradingView. 

BTC/USD 1-day chart

BTC/USD 1-day chart

Create a new watchlist by clicking on the “Watchlist and details” tab on the right top corner of TradingView. Next, click on the “Create new list” button and give it a name. New charts or coins can now be added to this list.

If a setup shows that breakout is imminent, then key levels can help determine targets. However, if the chart pattern is already in play, keeping an eye on the critical areas of support and resistance could help enter a position or buy the dips.

Zoom out

Trading patterns on the lower time frames can limit a trader’s idea of the overall trend. Therefore, zooming out helps determine if an asset is in a bull or bear market.

For example, a trend observed in altcoins for the current bull run is an almost exponential surge in price followed by a small dip or consolidation that is eventually followed by another exponential rally.

Altcoins price chart

Altcoins price chart

For this reason, zooming out helps determine such trends, especially since the altcoin market is highly correlated. In this instance, the DeFi tokens are all following a somewhat similar direction.