Technical Analysis of last 300 days of Bitcoin price data.
The top rectangangular frame shows the bar chart(green and orange bars) of the bitcoin price. A bar chart represents the OHLC(open, high, low, close) price for a time period (in this case 1 day) for an asset/stock/cryptocoin.
Bollinger Band: You can see a band (the dotted red lines above and below and a grey line in between) around the bitcoin OHLC price. The grey line represents the average price of 20 days. When the bars are above the grey line, the price is being appreciated, when the bars are below the grey line, the price is being depreciated.
Relative Strength Index(RSI): The blue line in second rectangular frame below shows RSI. Relative strength index(RSI) represents when the bitcoin has been overbought (more bought than being sold –> leads to price hike) or when the bitcoin has been oversold (more sold than being bought –> leads to price drop). When the blue RSI line is abobe 80 (check in the left y axis), it’s normally overbought (price rise) and you can see direct correlation of price hike comparing with the price chart above, when the blue RSI line is below 20, it’s normally oversold (price drop). You can see, right now everyone is panicking and everyone is selling, nobody almost is buying, so price is dropping rapidly. Bitcoin has hit the lowest RSI value of the year.
Moving Average Convergence Divergence(MACD): The third rectangular frame below shows MACD value with grey bars, grey dotted line and a red dotted line. The red dotted line is the average price of 26 days and the grey dotted line is the average price of 12 days. When the grey line is above the red line, it means that the short term price is higher than the long term price, but when it is below, it means that current price is being depreciated from the long term accepted price. MACD is another momentum oscillator which is similar to RSI. You can directly see how it is similar by comparing them. It’s probably easier to read the MACD chart than the RSI. Because there’s the zero line (in RSI it probably represents the value 50) when the grey bars are above(upwards) zero line, it means price appreciation, versus when the grey bars are below zero line(downwards), it means price depreciation. As you can see the price is highly depreciated now.
Commodity Channel Index (CCI): The fourth rectangular frame below shows CCI value with red line and filled red polygons. If in between 100 and -100, the price is not taking any huge turn (bull ride or bear drop). The filled polygons above 100 show the extreme price hike, where as the polygons below -100 show the recent extreme price drop. Because of these polygons, it’s very easy to see the price movement with CCI index.
Hope you enjoyed learning some of the common techniques used to understand market price.
Chart plotted by Abdullah Khan Zehady using R (quantmod, TTR library) language. Please contact if you want to reuse for your own purpose.
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