Why EMA Indicators Are Fantastic Support/Resistance Points

This may not have been said recently, but I’ll say it now:

All moving averages (MA) = supports/resistance points.

If the price is below a moving average, then the MA = resistance

If the price is above the moving average, then the MA = support

Don’t just take my word for it though!

Source ^ https://www.stocktrader.com/2011/06/22/common-market-support-resistance-levels/

Personally

I prefer using EMA indicators, rather than MA ones.

Source: https://www.investopedia.com/terms/e/ema.asp

So, given the fact that the volatility in crypto is consistently high most of the time — I feel as though this indicator is the best one to use.

Also, if you ever see the price fall below a moving average, that’s a really bearish sign.

If it rises above, that’s a really bullish sign.

Here Are Some Examples of this Principle at Work

Sorry for the messy chart — this screenshot was taking during a time where I was actively trying to chart and dissect the price of Bitcoin.

But for an FYI so that we’re all on the same page, the:

EMA-200 indicator = MAROON line

EMA-50 indicator = GOLDEN line

See where I drew the circle on this chart though?

When that happened, the price ended up falling 37%!

This isn’t the only time this has happened though. In fact, just about every time that the price falls below an MA indicator, it’s a pretty bearish signal, which makes sense when you consider our previous rule of :

  1. Price<MA , then MA=resistance.
  2. Price>MA, then MA=support.
Just a visualization of the drop in price, so that you can see

All of this happened on March 7th by the way, to be clear.

To Drill the Point Home

Just to drill the point home, you can see how Bitcoin literally rode the EMA-50 as a point of support all the way up to its peak in 2017.

This principle applies to all sort of MA indicators! Even the ones that you may have overlooked, like the Ichimoku ones for example.

The Ichimoku has MA Indicators?

Hell yeah they do.

Check it out:

This blue line above is the Conversion Line for the Ichimoku. It works similarly to a moving average (data is smoothed over in some way I don’t remember off top).

The red line is the Base Line.

So, based on the principles outlined above — when the price is above the conversion line on the Ichimoku, that is also another point of support.

Williams’ Alligator

The same can be said of the Williams’ Alligator as well.

If you’re unfamiliar with the Williams’ Alligator — check out this article that I wrote up on it here:

View story at Medium.com
View story at Medium.com

So, if you’ve already read through those articles or you know what the Williams’ is, then you’ll know that it’s a solid indicator (albeit a lagging one).

So, the beauty of the Williams’ Indicator is the fact that it uses 3 different MA indicators.

Here’s the formula for how they’re created and smoothed (don’t worry, the code handles all of that automatically — this is just FYI):

Source: https://www.forextraders.com/forex-education/forex-indicators/alligator-indicator-explained/

Conclusion

This by no means covers every aspect of MA indicators, but hopefully this adds to the growing list of information available for those that wish to learn more regarding MA.

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