Technical analysis made easy with bullish chart patterns packed into a cheat sheet, so that you can make better trades at Bitcoin or other cryptos!
Is Technical Analysis Useful?
Crypto, as a new asset class, is volatile in nature. Its price fluctuates because it is heavily influenced by supply and demand, and it reflects how the public feels about the asset. This is known as market sentiment — bullish when prices are rising, bearish when prices are falling.
The market is constantly changing. In many cases, it does not matter how you feel about it, it only matters how the market is going to feel about it.
Market sentiment is a critical indicator to predict price movements and make investment decisions. An easy way to gauge market sentiment is by looking at chart patterns. They tend to repeat themselves, and once you are able to recognize them, it becomes easier to strategize your entries and exits.
However, it is important to note that they are NOT a guarantee that the market will move in that predicted direction. It should only serve as a frame of reference for you to feel how the market moves.
Bullish Chart Patterns
These are some of the most common bullish chart patterns you will see in the market. This cheat sheet will help you identify real-time candlestick patterns whenever you’re on Binance, FTX or other crypto exchanges, so that you can time your entries better.
Ascending Triangle (Bullish)
An ascending triangle is a bullish pattern which signifies the continuation of an uptrend, hence “ascending” triangle. It can be drawn onto the chart by (1) placing a horizontal line along the swing highs, which is the resistance, and then (2) drawing an ascending trend line along the swing lows, which is the support.
Ascending triangles often have more than two identical peak highs which allow for the resistance line to be horizontal.
The pattern completes itself when the trend breaks through the resistance, continuing the uptrend. This signifies that the asset has a high buying pressure, and buyers are most likely opting for a long position.
Falling Wedges (Bullish)
A falling wedge occurs when the trend line is sandwiched between two downwardly sloping lines, getting narrower as the resistance line gets closer to the support line. In this case, the line of resistance is steeper than the support.
It may seem like a downward trend but it isn’t. In fact, it is a reversal pattern. A falling wedge is usually indicative that an asset’s price will drop before it rises and breaks through the level of resistance, as shown in the second picture above.
A falling wedge usually signals the end of the consolidation phase that facilitated a pull back lower. The consolidation phase happens when buyers regroup and attract new buying interest. It can be explained as the “calm before the storm.”
Double Bottom (Bullish)
A double bottom indicates a period of selling in which the price drops below the level of support. It will then rise to the level of resistance, before dropping again. It resembles a W shape, hence “double bottom.” Jokingly, the W stands for “win”!
Finally, the trend will reverse and begin an uptrend as the market becomes more bullish. It may seem like a bearish trend, but it is in fact a bullish reversal pattern. This signifies the end of a downtrend and a shift towards an uptrend.
It is important to note that most traders would jump the gun by entering a position before the pattern is activated. A double bottom is active only once the buyers break the neck line and secure a close above it. This is why it is important to wait for a close above the neck line before entering the market.
Rounding Bottom (Bullish)
A rounding bottom is both a bullish continuation and a reversal. During an uptrend, the price will drop slightly before rising once more. This would be a bullish continuation.
Afterwards, the bullish reversal occurs when the price is in a downward trend and a rounding bottom forms before the trend reverses and continue upwards.
Bull Flag and Pennant (Bullish)
A bull flag signals that the overall uptrend is likely to continue, followed by a consolidation. It resembles a flag fluttering upwards in the wind.
Usually, there will be a significant increase during the early stages of the trend, before entering into a series of smaller upward or downward movements. This would be the pennant.
Pennants can be either bullish or bearish, and they can represent a continuation or a reversal. The picture above is an example of a bullish continuation.
While a pennant may seem similar to a wedge pattern, as mentioned in the previous section, wedges are much more narrower than pennants. Moreover, wedges differ from pennants because wedges are always ascending or descending, whereas pennants remain horizontal.
These are some of the most common bullish patterns you will see in the market. This cheat sheet will help you better time your entries when the market sentiment is bullish. However, it is important to note that crypto is volatile in general.
These chart patterns are NOT a guarantee that the market will move in that predicted direction. It should only serve as a frame of reference for you to feel how the market moves.