drakkar-software technical-analysis
Overview
This skill provides comprehensive guidance on analyzing technical indicators to evaluate market conditions and generate trading signals. Use this for any technical analysis-related questions or when you need to interpret indicator values.
Instructions
1. Understand Key Technical Indicators
RSI (Relative Strength Index)
- Range: 0-100
- Oversold: < 30 (potential buy signal)
- Overbought: > 70 (potential sell signal)
- Divergence: Price makes new high/low but RSI doesn't (reversal signal)
MACD (Moving Average Convergence Divergence)
- Components: MACD line, Signal line, Histogram
- Bullish crossover: MACD crosses above signal line
- Bearish crossover: MACD crosses below signal line
- Histogram: Shows momentum strength
Moving Averages
- Short-term (SMA/EMA 20): Recent trend
- Medium-term (SMA/EMA 50): Intermediate trend
- Long-term (SMA/EMA 200): Major trend
- Golden cross: 50 MA crosses above 200 MA (bullish)
- Death cross: 50 MA crosses below 200 MA (bearish)
Bollinger Bands
- Upper/Lower bands: Volatility boundaries
- Price near upper band: Potentially overbought
- Price near lower band: Potentially oversold
- Band squeeze: Low volatility (potential breakout coming)
- Band expansion: High volatility (trend in motion)
2. Analyze Multiple Timeframes
When analyzing indicators, consider multiple timeframes:
- 1H/4H: Short-term trading signals
- 1D: Medium-term trend confirmation
- 1W: Long-term trend direction
Higher timeframes carry more weight for trend direction.
3. Look for Indicator Convergence
Strong signals occur when multiple indicators agree:
- RSI oversold + MACD bullish crossover + price above 50 MA = Strong buy
- RSI overbought + MACD bearish crossover + price below 50 MA = Strong sell
4. Assess Trend Strength
Determine if the market is:
- Strong uptrend: Price above all MAs, RSI 50-70, MACD positive and rising
- Strong downtrend: Price below all MAs, RSI 30-50, MACD negative and falling
- Ranging/Consolidation: Price oscillating around MAs, RSI 40-60, MACD near zero
5. Identify Support and Resistance
- Previous highs/lows
- Moving averages acting as dynamic support/resistance
- Bollinger Bands as volatility-based support/resistance
- Round numbers (psychological levels)
6. Volume Analysis
- Rising volume on breakouts confirms strength
- Declining volume on rallies suggests weakness
- Volume spikes often precede reversals
Output Format
When analyzing technical indicators, provide:
{
"eval_note": <float -1 to 1>,
"confidence": <float 0-1>,
"trend": "uptrend" | "downtrend" | "ranging",
"key_indicators": ["RSI oversold at 28", "MACD bullish crossover", "Price above 50 MA"],
"description": "Detailed analysis explaining the reasoning"
}
Common Patterns
Bullish Reversal Signs
- RSI divergence (price lower low, RSI higher low)
- MACD histogram turning positive
- Price bouncing off support
- Volume spike on upward move
Bearish Reversal Signs
- RSI divergence (price higher high, RSI lower high)
- MACD histogram turning negative
- Price rejected at resistance
- Volume spike on downward move
Best Practices
- Never rely on a single indicator - use multiple confirmations
- Consider the broader market context and trend
- Account for timeframe - align trade direction with higher timeframe trend
- Adjust interpretation for different market conditions (trending vs ranging)
- Be aware of false signals in choppy, low-volume markets