1- What is the support and resistance zone?

The support zone will be the bottom of the cryptographic asset where the asset usually bounces up, this is driven by the large number of purchase orders that occur at the moment when the price of the asset reaches said zone, if this happens several Sometimes we can say that the support is strong because sellers do not have the ability to drive the price down further. Then the resistance zone will be the ceiling of the cryptographic asset where it usually falls down, this will be driven by the large amounts of sell orders that occur when the asset reaches that zone, even if it touches several times and ends going down we can conclude that the resistance zone is very strong.

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Starting from the knowledge that the teacher dictates to us, you can see in the image of the graph that I was placing a zone, said zone is marked from the wick of the candle to the body of the candle and thus we have the resistance zone that will be the part high of the asset where it has not been able to continue upwards and the support zone that will be the low part of the asset where it has not been able to continue falling. Placing zones we are not going to be placing horizontal lines, so it will not be a 100% perfect layout but the zone is still very effective because the movements in the market are never perfect and it does not serve perfectly to identify the reaction of the price when it reaches said zones of support or resistance.

The zones reflect the demand and supply of the cryptographic asset, I really think that locating the supports and resistances in this way is of great help in order to better understand if the asset will continue strongly towards a breakout or if otherwise it will not have as much strength to break the resistance or support zone.

2- Explain the different types of support and resistance with the appropriate demonstration.

For me, support and resistance levels are a technical analysis pattern that can never be missing, because with them we can get many trading opportunities, both by following the price reaction or by following the breakout of those support and resistance areas. Now let's look at the different types of support and resistance in the market:

Support and Resistance with a Horizontal zone

When we place a resistance and support area we must understand that when a breakout occurs not everything ends, since if there is a breakout of the resistance then that level will be considered as a support where the price can then bounce up in a retracement and pick up bullish momentum again. We also see it in the break of the support where that area will become resistance, we can also expect a reversal towards the rise of the asset and that it will fall again confirming that the area of ​​that level is strong and will be a resistance now. To find a strong support and resistance zone that can serve many times in the future, it will have to be in a high time frame, because here we find the strongest trends and therefore the strongest support and resistance levels.

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Here on the chart image I was able to place a strong support and resistance zone on a 4 hour timeframe. It can be seen that the price of the asset goes down 3 times touching the same level without much strength to continue going down, so it will be a support zone where the price then had an upward momentum, later in time there was a break of that same level to now become a resistance and effectively the price has touched the level 3 times where it has also been reacting to the downside of the market.

Inclined Support and Resistance Levels

When we talk about sloped levels we are talking about trend lines, they also serve as a good support or resistance in the market and we can detail very well how the price reacts once it reaches those levels. It is important to be able to keep in mind that trend lines can serve as support and resistance because that way we can make buying or selling decisions depending on the trend of the cryptographic asset. If I mention trend because we are going to have two types of inclined lines, which will be the bearish trend line that details a resistance and the bullish trend line that details a support in the market.

bearish trend

A bearish trend line confirms that the asset is going down, but once we place the trend line that can join at least two touches we can see that this trend line is identified as a resistance level, that is because after a lower low of the asset the price makes a retracement to the upside, where it can even go up a little more to touch the trend line and then have another fall in price again because that resistance level is strong and there are many orders selling.

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We can see in the image of the graph how we find a downward trend line in the ADA/USD asset, clearly it is a very strong level where there are many purchase orders and the price of the asset has been falling the 2 times it has touched and surely the traders will be very attentive when the price is approached again to see if there are more sales or there is a break where a buy can be found.

bullish trend

A bullish trend line is confirming that the asset is on the rise, but equally that trend line will serve as a great support, this is because the price will be making higher and higher highs but then in the setbacks it can get to the lowest level touching that trend line and then continue with the rise in price.

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We can see in the image of the graph that we have placed a bullish trend line in the BTC/USD asset, that trend line on a daily basis marks us that it is a very strong support level and that the price of the asset has a great rise. We see that it was reaching that level 2 times where it was going up again with great force and it is because there is a lot of buying pressure at that level of the uptrend line.

Dynamic Support and Resistance

When we have a dynamic support or resistance we refer to the moving averages, they can generally help us see the trend of the asset and also identify reaction levels as a trend line does, which is why it is very similar and surely when understanding the previous point it will be easier to understand this level of dynamic support and resistance. In my case, I really like to use the EMA of 50 periods, I think it tends to follow the trend of an asset very well without many variations and it works for me in high and low timeframes. Therefore, if we see that the price of the asset bounces up from the 50-period EMA, it will be a support and if it tends to react downwards from the 50-period EMA, it will be a resistance.

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We have here the SOL/USDT asset where a great bullish trend can be visualized, followed by that, it can also be identified how the price of the asset tends to bounce several times at the 50-period EMA and continues its upward direction, which would be a level very good dynamic support to search for operations in purchases.

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Once again we are in the SOL/USDT asset where a large downtrend can be seen, followed by this we also notice how the price of the asset has touched the level of the 50 period EMA below and had a downward bounce confirming that the resistance level is strong and we can look for selling.

3- Identify false and successful breakouts. (demonstrate with screenshots)

We are going to be able to find the movement of a successful breakout when the price of an asset has a strong momentum following the direction of the trend, which makes it approach a critical area where there may be support or resistance and the breakout point occurs. breakout to follow the continuation trend. Then we have the reversal breakout that we are going to find when the price of an asset is in a rise or fall and at the moment it begins to have parallel range movements where followed by this it goes in the opposite direction of the movement breaking out of that range .

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Here we can find a breakout of the resistance zone starting an uptrend of the LUNA/USDT asset, we have a critical zone where the price previously bounced as support, then functioned as resistance causing the price to fall twice and for the 3rd time the price if it had enough strength to make a break from that critical area that would be a resistance at that time and start a big rise in its price.

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Here we are in a reversal breakout situation, clearly the ETH/USD asset was trending up, where it then had a small break at its high zone making sideways consolidation movement, and then ended up breaking down from that zone where it even breaks the 50 period EMA which is the dynamic support of the chart and as you can see then it was in a big drop.

False breakouts

It is important to be able to detect false breakouts in critical zones, as these movements can trap many traders in positions that then go to stop loss and for that reason when there is a breakout of the support or resistance zone you have to be patient so that it can be confirmed that the direction of the movement will continue its course. It may happen that the breakout was not so strong, which is why the volume is lowered by reversing the direction again or it is due to the manipulation of the market makers who want to reverse the market again and thus take many profits from the losses of the retailers.

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We can visualize in the image of the graph how we have a false breakout of the asset, first we have the support and resistance zones where the price made a breakout of the resistance but did not have the strength to continue rising and ended up reversing the direction and there it was possible have a losing trade. Subsequently, the price did have a better break where the price followed the upward course and that may be due to volatility or market manipulation.

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Now we find a false break but in the opposite direction, we have the resistance zone and the support zone of the asset. There comes a time when the asset manages to break out of the support zone but this breakout does not have any strength to continue going down and even leaves some large wicks that indicate that the price will reverse again and it is important to be able to identify this on the chart so as not to fall into false breakouts that later leave us with a stop loss operation.

4- Use the volume and RSI indicator combined with breakouts and identify the entry point. (demonstrate with screenshots).

I will be placing the RSI indicator which details when an asset is overbought and when it is oversold. These are the main rules of this indicator, by which everyone is guided when it is above the 70 levels it is a sell signal and when it is below the 30 levels it is a buy signal. Then the volume is an indicator that will help us to know if the breakout of an area has the strength to follow the direction of the movement and in combination we can look for a buy or sell entry. Now what is going to happen with the RSI is that we will be using it in a totally different way, this is because the value of 50 will be the midpoint to help us confirm falls or rises in price and then we see it better on the chart.

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We can see that we have the AXS/USD chart where I was able to locate a critical zone, since this zone served as resistance and also as support, which is why it is very important to consider since the price tends to react a lot when it reaches this level. The price of the asset begins to fall where it manages to make a break of the dynamic support that will be the 50 EMA, then it makes a break of the support zone and finally it makes a break of the inclined support of the uptrend line that it had placed. We have 3 confirmations that the price wants to go down, then if we look at the RSI indicator we can confirm that its oscillating line crosses below the value of 50 and that confirms that it will continue to go down and we also have an increase in volume that helps us too to confirm the strength of sellers.

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Currently we have the ETH/USD chart where I was able to locate a critical zone of the asset, previously it reacted as support and was also functioning as price resistance. Now we can see that the move made a breakout of sloping resistance which would be the downtrend line, then it also made a breakout of dynamic resistance which would be the 50 period EMA and lastly a breakout of the current resistance zone. Then, observing the RSI indicator, we notice that its oscillating line crosses above the value of 50, which indicates that it can continue to rise and the volume was also on the rise, so all the signs are bullish. In conclusion, we can take a buying operation combining the critical zones and the RSI indicator with the volume.