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2 ways to spot crypto and spot price reversals

By
Redakcja
-
5 min reading

There are many successful traders who are looking for double bottom and W bottom reversal patterns on technical charts in order to spot powerful price reversals. Trading in this method seems to be the best way to be profitable.

There are many successful traders who are looking for double bottom and W bottom reversal patterns on technical charts in order to spot powerful price reversals. Trading in this method seems to be the best way to be profitable. If traders learn to spot the latest trend early, it gives a chance to buy with a good risk to reward ratio. Also, to understand and recognize the trend, traders should also be able to admit it when its has reversed direction. 

There are many patterns which point out a possible trend change, one of the easiest to spot is the double bottom pattern. This can help the traders transform their strategy when the trend reverses direction from bearish to bullish. The double bottom pattern creates a downtrend and consists of two low points which are scarcely formed near a similar horizontal level, with a little peak in between the troughs. When the price blows up and closes on top of the minor peak after the formation of the second trough, the setup becomes complete. This is also known as a reversal pattern, which ends up as an intermediate to a long-term trend change. As the pattern seems like the shape of “W”, which some mention as a W bottom. 

The asset has been in downtrend but in a certain price trend the bulls believe the asset is not given much value and begin buying it. This helps with the formation of the first bottom where demand go beyond supply and with that a relief rally begins. Nevertheless, most bears are still unassured that a bottom is in and they will start positions again after a pullback. The price goes down but as soon as it reaches the level of the first bottom, the bulls start to accumulate which then seize the diminished and begin another relief rally. The second bottom is at 3% of the level of the first bottom which is meant valid.  

 When the price goes higher than the resistance line, it points out a change in trend from down below to up. The minimum target objective for the pattern can be reached at by calculating the distance from the resistance line to the down pit and then including the number on the top of the resistance line. Texos (XTZ) price was in a downtrend before hitting the first bottom at $1.78 during November 4rth, 2020. Along with that, the XTZ/UDT pair started a relief rally that obstructed at $2.96 on Nov. 25, 2020, the bears could not manage the lower levels. The pair quickly got better the next day and started recovery, by creating a second bottom. 

The bears tried to defend violently towards the resistance line and tried to trap the eager bulls following the breakout. The bulls bought the dips and the pair made a strong breakout on Feb. 5, which began the new uptrend. The degree of depth from the resistance line to the bottom is $1.18. adding this value to the level of the resistance line at $2.96 gives a minimum pattern target at $4.14. however, in this scenario the pair overshot the target objective and rallied to $5.64 on Feb 14. 

Ether (ETH) have had a strong downtrend since surpassing out at $1,440 in January 2018. The demand transcended supply when the price reached at $81.70 in December 2018. Ending up with the formation of the first bottom. Therefore, the price retrieved to $366.80 in June 2019 where bears again came in. The following decline formed during the second bottom at $86 in March 2020. The time limit between the two bottoms is considered as very large, but in trading there are no patterns which sets in the stone. As both the levels were close to each other and the price actions creates a W, traders are able to consider this as a double bottom. This completed the reversal and the ETH/USDT pair which began a strong uptrend. Even though minimum target objective of the pattern was only $651.90, the pair rose to over $4,300 during the ball run.

There had been times where trades tried to double bottom and buy before the price breaks out of the resistance line. This could mean sometimes the result are losses as the pattern may eventually remain unfinished. Bitcoin (BTC) was in a downtrend since reaching the top at $19,798.68 in December 2017. The buyers hindered the decline at $6,000.01 on Feb. 6, 2018. Hence, the relief rally reached $11,786.01 on Feb. 20,2018. This level was meant to be a resistance and the price again went down to $6,430 on April 1, 2018. This seemed like a double bottom which even the bulls could not push the price to $11,786.01 resistance. This meant the double bottom pattern did not finish. 

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