One of the best ways to trade cryptocurrency mining stocks, like Marathon Digital (MARA) or Riot Blockchain (RIOT) is to follow Bitcoin technically.
In fact, if you look at a six-month chart of Bitcoin and MARA, for example, you’ll see that wherever Bitcoin goes, MARA is sure to follow. That’s obvious. Now, we just need to figure out exactly when to buy and when to go short, which we can do with technical indicators, including relative strength (RSI), MACD, and Williams’ %R
When all three align at a specific point, that’s our indicator to sell.
In January 2021, for example, RSI became overbought above its 70-line after BTC rallied from $27,957 to $41,964. At the same time, we saw an unsustainable spike in MACD. In addition, Williams’ %R was overbought above its 20-line.
Not long after, BTC would fall to double bottom support around $28,817.
The same thing happened to Bitcoin in late February 2021 before it fell from $58,348 to $43,061, and again mid-March 2021. Granted, anyone can look at a chart and make a great call after the fact. But if you watch this particular setup moving forward, you’ll start to see exactly when and where to buy.
Each time BTC pulled back, MARA followed.
When all three align at a specific point, that’s our indicator to buy.
Now we want to spot buy signals.
In the case of MARA and BTC, each time RSI dips to its mid-range around 50, it’s a buy signal. We can confirm that potential buy with Williams’ %R when it dips to or below its 80-line. With MACD, we find better use for it when looking for tops.
Investors can use these same technical indicators with any stock, index, and ETF out there.
While I can’t guarantee it’ll give you 100% success, it’s another interesting way to spot opportunities in this crazed market.