ETHUSD analysis with Kagi/Gann Swing charts
Yesterday was quite a day for cryptocurrencies. We had some significant profit taking, some very large swings to the downside and a lot of volatility. Hopefully, we can find some equilibrium in these prices. Today though, I wanted to go over the ETHUSD chart using Kagi.
I’ve shared some analysis before with charts using Renko analysis and Heiken-Ashi candlesticks. Today we will be using an equally obscure form of technical analysis called ‘Kagi’. On a side note, Kagi charts are also called Gann Swing charts. Kagi is probably one of the more interesting forms of price analysis. In reality, it is fairly simple. If you remember reading about the Renko bricks, you will find a lot of the similar ‘mechanics’ are involved with Kagi charts as well. Let’s take a look at the current price action of the ETHUSD pair as an example for understanding this chart style.
Kagi charts, like Renko bricks, do not account for time. Kagi charts are calculated solely by price action. There are 4 components of a Kagi chart we should look at.
- Shoulders (also called Yang)
- Waists (also called Yin)
Shoulders represent the highs and depending on the instrument or market, often times a series of 6 or more consecutive highs signals an impending reversal. The reverse is true for waists. The most confusing part of Kagi charts for people to understand is what are the conditions for a line changing from green to red or red to green?
Think of each horizontal line (known as troughs) as a support/resistance line. #3 on the image above shows that the green arrow is pointing to a horizontal green trough. Then, when price moved where it was below that level, the line turned red. That is when you would consider taking a short or sell.
Some ways that you can confirm if a change in color of a Kagi line is going to really be a high probability change for going long or short is to use other confirmatory indicators. The most common forms of indicators and oscillators (RSI, Stochastics, Stochastic RSI, MACD, etc) are not going to be useful. Instead, try using the TSI (True Strength Index). The True Strength Index is a much smoother trend identifier and will help to find trades using Kagi analysis much easier. On to today’s look at ETH!
What to look for
It is not lost on any cryptotrader how important the last few days have been for cryptocurrencies as a whole. Ethereum, like its big brother Bitcoin, has experienced some significant volume and upside, along with some correction. We can see that Ethereum is between two very important support and resistance lines.
Watch very closely for the vertical lines to shift color and cross the most recent trough, especially if the price is trading near one of the lines of support or resistance.
Try using traditional candlesticks side by side with Kagi (or Renko). Using traditional price action with time and price along with using a smoother and less ‘noisy’ form of price analysis such as Kagi (or Renko) is a fantastic way to view the market.