Technical Analysis

This skill provides a systematic framework for analyzing price charts, computing technical indicators, identifying chart patterns, and generating trade setups with quantified confidence scores. It uses multi-timeframe analysis to establish directional bias on higher timeframes and precise entries on lower timeframes, then aggregates multiple signals into a single confluence score to rank trade quality.

When to Use This Skill

• When analyzing any asset’s price chart for trade opportunities
• When a user asks about specific indicators (RSI, MACD, moving averages, etc.)
• When identifying support and resistance levels
• When looking for chart pattern formations
• When performing multi-timeframe analysis for trade entries
• When building a scored trade setup with confluence from multiple signals
• When evaluating whether a crypto asset is overbought/oversold
• When analyzing funding rates, volume profile, or liquidation levels (crypto-specific)

What This Skill Does

1. Indicator Computation: Calculates RSI, MACD, SMA, EMA, VWAP, Bollinger Bands, ATR, OBV, and Stochastic oscillator with proper parameters
2. Chart Pattern Recognition: Identifies head & shoulders, double tops/bottoms, triangles, flags, wedges, and other classical patterns
3. Support/Resistance Mapping: Finds key price levels from historical pivots, volume nodes, and round numbers
4. Multi-Timeframe Analysis: Establishes bias on higher timeframes, then refines entry on lower timeframes
5. Confluence Scoring: Combines multiple indicator signals into a 0-100 confidence score
6. Trade Setup Generation: Produces structured trade setups with entry, stop, target, and confidence rating
7. Crypto-Specific Analysis: Incorporates funding rates, volume profile, and liquidation heatmaps

How to Use

Full Technical Analysis

Run technical analysis on [asset] — identify trend, key levels, and trade setups

Specific Indicator Check

What does the RSI and MACD say about [asset] on the 4H timeframe?

Chart Pattern Scan

Are there any chart patterns forming on [asset]? Check daily and 4H charts.

Multi-Timeframe Analysis

Multi-timeframe analysis for [asset] — weekly, daily, 4H for a swing trade setup

Confluence Score

Score the current trade setup for going long [asset] at [price] — how many signals align?

Data Sources

With MCP/CLI tools connected:

• yFinance MCPs (tooyipjee, maxscheijen, Adity-star) — Historical OHLCV data, indicator computation, stock/ETF/crypto prices
• CoinGecko MCP / CoinGecko Price MCP — Crypto prices, volume, market cap, historical data
• Binance MCP (TermiX, snjyor) — Real-time crypto OHLCV, funding rates, order book depth, liquidation data
• OpenBB CLI — Advanced charting, screeners, multi-asset technical analysis
• DexScreener — DEX token price charts, volume, liquidity data
• Bybit MCP / OKX MCP — Additional exchange data, open interest, funding rates

Without tool access: Ask the user to provide:

1. OHLCV data for the asset (at least 50 bars on the desired timeframe)
2. Current price and recent price range
3. Timeframe(s) of interest (1H, 4H, Daily, Weekly)
4. Any specific indicators they want analyzed
5. Known support/resistance levels

Proceed with analysis using provided data. State which computations are approximate vs. exact.

Methodology

Step 1: Determine Market Context and Trend

Before computing any indicators, establish the market regime on the highest relevant timeframe.

Trend Identification Decision Tree:

1. Is price above the 200-period SMA?
   YES → Long-term bullish bias
   NO  → Long-term bearish bias

2. Is the 50-SMA above the 200-SMA?
   YES → Confirmed uptrend (Golden Cross territory)
   NO  → Confirmed downtrend (Death Cross territory)

3. Is price making Higher Highs (HH) and Higher Lows (HL)?
   YES → Active uptrend
   NO  → Check for Lower Highs (LH) and Lower Lows (LL) → Active downtrend

4. None of the above clearly?
   → Range-bound / consolidation — switch to mean-reversion framework

Market Regime Classification:

Regime	Characteristics	Preferred Strategy
Strong Trend	ADX > 25, clear HH/HL or LL/LH, price > 20 EMA	Trend-following, momentum
Weak Trend	ADX 15-25, choppy HH/HL	Reduced size trend trades
Range-bound	ADX < 15, price oscillating between S/R	Mean reversion, fade extremes
Volatile/Chaotic	ATR expanding rapidly, no structure	Reduce size or sit out

Step 2: Compute Core Indicators

Calculate these indicators in order. Each has specific signal conditions.

2A: Moving Averages

SMA(period) = Sum(Close, period) / period
EMA(period) = Close × K + EMA_prev × (1 - K), where K = 2 / (period + 1)
VWAP = Cumulative(Price × Volume) / Cumulative(Volume)  [intraday reset daily]

Key Periods:
  Fast:   8-EMA, 20-EMA (short-term momentum)
  Medium: 50-SMA (intermediate trend)
  Slow:   200-SMA (long-term trend)
  VWAP:   Intraday institutional reference price

Signals:
  Bullish: Price > 20 EMA > 50 SMA > 200 SMA (stacked bullish)
  Bearish: Price < 20 EMA < 50 SMA < 200 SMA (stacked bearish)
  Cross:   Golden Cross (50 crosses above 200) / Death Cross (50 crosses below 200)

2B: RSI (Relative Strength Index)

RSI(14) = 100 - [100 / (1 + RS)]
RS = Average Gain(14) / Average Loss(14)

Zones:
  > 70: Overbought — potential sell/short signal (in trending markets, can stay >70)
  < 30: Oversold — potential buy/long signal (in downtrends, can stay <30)
  40-60: Neutral zone

Advanced Signals:
  Bullish divergence: Price makes lower low, RSI makes higher low → reversal signal
  Bearish divergence: Price makes higher high, RSI makes lower high → reversal signal
  Hidden bullish divergence: Price makes higher low, RSI makes lower low → trend continuation
  Failure swing: RSI breaks above/below a prior RSI peak/trough → strong momentum shift

2C: MACD (Moving Average Convergence Divergence)

MACD Line = EMA(12) - EMA(26)
Signal Line = EMA(9) of MACD Line
Histogram = MACD Line - Signal Line

Signals:
  Bullish cross: MACD crosses above Signal (buy)
  Bearish cross: MACD crosses below Signal (sell)
  Zero line cross: MACD crosses above/below zero (trend change)
  Histogram expansion: Momentum increasing
  Histogram contraction: Momentum fading — potential reversal ahead

Divergence (same logic as RSI):
  Bullish: Price lower low + MACD higher low
  Bearish: Price higher high + MACD lower high

2D: Bollinger Bands

Middle Band = SMA(20)
Upper Band = SMA(20) + 2 × StdDev(20)
Lower Band = SMA(20) - 2 × StdDev(20)
Bandwidth = (Upper - Lower) / Middle × 100

Signals:
  Price touches lower band in uptrend → buy the dip
  Price touches upper band in downtrend → short the rally
  Squeeze (Bandwidth < 4%): Volatility contraction → expect breakout
  Walking the band: Price hugging upper/lower band → strong trend, do NOT fade

2E: ATR (Average True Range)

True Range = Max(High - Low, |High - Prev Close|, |Low - Prev Close|)
ATR(14) = SMA(True Range, 14)

Usage:
  Stop-loss distance: 1.5-3.0 × ATR from entry
  Volatility filter: ATR expanding = trending, ATR contracting = consolidating
  Position sizing: Risk$ / ATR = units (see risk-management skill)
  Breakout confirmation: Breakout candle range > 1.5 × ATR = strong breakout

2F: OBV (On-Balance Volume)

If Close > Prev Close: OBV = Prev OBV + Volume
If Close < Prev Close: OBV = Prev OBV - Volume
If Close = Prev Close: OBV = Prev OBV

Signals:
  OBV rising while price rising → trend confirmed by volume
  OBV divergence: OBV falling while price rising → distribution, likely reversal
  OBV breakout: OBV breaks to new high/low before price → leading indicator

2G: Stochastic Oscillator

%K(14) = (Close - Lowest Low(14)) / (Highest High(14) - Lowest Low(14)) × 100
%D = SMA(%K, 3)

Zones:
  > 80: Overbought
  < 20: Oversold

Signals:
  Bullish: %K crosses above %D below 20 → buy
  Bearish: %K crosses below %D above 80 → sell
  Best in range-bound markets — unreliable in strong trends

Step 3: Identify Chart Patterns

Scan for these classical patterns. Each has a specific measured move target.

Pattern	Type	Target Calculation	Reliability
Head & Shoulders	Reversal	Neckline - (Head - Neckline)	High (70%+)
Inverse H&S	Reversal	Neckline + (Neckline - Head)	High (70%+)
Double Top	Reversal	Support - (Peak - Support)	Moderate (65%)
Double Bottom	Reversal	Resistance + (Resistance - Trough)	Moderate (65%)
Ascending Triangle	Continuation	Flat top + (Flat top - Rising trendline start)	Moderate (65%)
Descending Triangle	Continuation	Flat bottom - (Falling trendline start - Flat bottom)	Moderate (65%)
Symmetrical Triangle	Neutral	Direction of breakout × height of triangle base	Lower (55%)
Bull Flag	Continuation	Flagpole height added to breakout point	High (68%)
Bear Flag	Continuation	Flagpole height subtracted from breakdown point	High (68%)
Rising Wedge	Bearish	Breakdown to wedge base	Moderate (62%)
Falling Wedge	Bullish	Breakout to wedge base	Moderate (62%)
Cup & Handle	Bullish	Cup depth added to breakout	High (70%)

Pattern validation rules:

• Pattern must form over at least 10 bars (not 2-3 bar “patterns”)
• Volume should confirm: declining volume during pattern, expanding on breakout
• Breakout candle should close beyond the pattern boundary (not just wick)
• Wait for retest of breakout level for higher-probability entry

Step 4: Map Support and Resistance

Methods for finding S/R levels (use all, then cluster):

1. HISTORICAL PIVOTS
   - Swing highs/lows from the past 50-200 bars
   - More touches = stronger level
   - Score: 1 point per touch, 2 points if touch + bounce with volume

2. VOLUME PROFILE (VPVR)
   - High-Volume Nodes (HVN): price spends time here → acts as magnet (support/resistance)
   - Low-Volume Nodes (LVN): price moves through quickly → acts as breakout zone
   - Point of Control (POC): highest volume price → strongest S/R

3. ROUND NUMBERS
   - Psychological levels: $10, $50, $100, $1000, $10000, $50000 (BTC), etc.
   - Add half-levels for crypto: $25K, $35K, $75K

4. MOVING AVERAGES AS DYNAMIC S/R
   - 20 EMA: short-term dynamic support (trending markets)
   - 50 SMA: intermediate support/resistance
   - 200 SMA: major trend-defining level

5. FIBONACCI RETRACEMENTS
   - Key levels: 0.236, 0.382, 0.500, 0.618, 0.786
   - Most reliable: 0.618 (golden ratio) and 0.382
   - Draw from swing low to swing high (uptrend) or high to low (downtrend)

S/R Level Strength Scoring:

Factor	Points
Price touch (bounce)	+1 per touch
High volume at level	+2
Confluence with Fibonacci	+2
Confluence with round number	+1
Confluence with moving average	+2
Level held on higher timeframe	+3
Recent (within 30 bars)	+1
Old (>100 bars) but respected	+2

Levels scoring 5+ are “strong.” Levels scoring 8+ are “major.”

Step 5: Multi-Timeframe Analysis (MTF)

This is the most important step for generating high-quality entries. The principle: Higher timeframe determines direction, lower timeframe determines entry.

SWING TRADING (hold 2-14 days):
  Bias TF:   Weekly → establishes primary trend
  Setup TF:  Daily → identifies trade setup and pattern
  Entry TF:  4H → pinpoints precise entry and tight stop

DAY TRADING (hold minutes to hours):
  Bias TF:   Daily → establishes primary trend
  Setup TF:  4H/1H → identifies trade setup
  Entry TF:  15m/5m → pinpoints entry

SCALPING (hold seconds to minutes):
  Bias TF:   1H → establishes intraday bias
  Setup TF:  15m → identifies setup
  Entry TF:  1m/5m → pinpoints entry

POSITION TRADING (hold weeks to months):
  Bias TF:   Monthly → macro trend
  Setup TF:  Weekly → identifies setup
  Entry TF:  Daily → entry timing

MTF Alignment Rules:

1. All three timeframes must agree on direction for a high-confidence trade
2. If bias TF and setup TF disagree, NO TRADE (or reduce size by 50%)
3. Entry TF is ONLY for timing — never override the higher TF bias
4. A setup on the bias TF is worth 3x a setup on the entry TF alone

Step 6: Crypto-Specific Indicators

These indicators are unique to crypto markets and add significant edge.

Funding Rates (Perpetual Futures)

Positive funding rate (>0.01% per 8h): Longs pay shorts → market over-leveraged long
  Signal: Extremely positive (>0.05%) → potential long squeeze, bearish

Negative funding rate (<-0.01% per 8h): Shorts pay longs → market over-leveraged short
  Signal: Extremely negative (<-0.05%) → potential short squeeze, bullish

Neutral zone: -0.01% to +0.01% → no leverage signal

Liquidation Heatmaps

Large liquidation clusters above price → price may be pulled up (magnet effect)
Large liquidation clusters below price → price may be pulled down
After liquidation cascade: price often reverses (forced selling/buying exhausted)

Open Interest (OI)

Rising OI + Rising Price → New longs entering, bullish continuation
Rising OI + Falling Price → New shorts entering, bearish continuation
Falling OI + Rising Price → Short covering rally (weak, may reverse)
Falling OI + Falling Price → Long liquidation (weak, may bounce)

Step 7: Build Confluence Score

Aggregate all signals into a single 0-100 confidence score for the trade setup.

CONFLUENCE SCORING TABLE (Long Setup Example)

| Signal                          | Points | Max |
|---------------------------------|--------|-----|
| Price > 200 SMA                 | +10    | 10  |
| Price > 50 SMA > 200 SMA       | +5     | 5   |
| RSI 30-50 (oversold bounce)     | +10    | 10  |
| RSI bullish divergence          | +10    | 10  |
| MACD bullish cross              | +10    | 10  |
| MACD above zero line            | +5     | 5   |
| Price at strong S/R support     | +10    | 10  |
| Bullish chart pattern present   | +10    | 10  |
| Volume confirms (OBV rising)    | +5     | 5   |
| Bollinger squeeze + breakout    | +5     | 5   |
| Higher TF trend agrees          | +10    | 10  |
| Funding rate supports direction | +5     | 5   |
| Stochastic oversold cross up    | +5     | 5   |
|                                 |        |     |
| TOTAL POSSIBLE                  |        | 100 |

CONFIDENCE RATING:
  80-100: A+ setup — maximum position size (per risk-management)
  65-79:  A setup — standard position size
  50-64:  B setup — reduced position size (50-75% of standard)
  35-49:  C setup — minimal position size (25-50%) or pass
  < 35:   NO TRADE — insufficient confluence

For short setups: Invert the bullish signals (e.g., Price < 200 SMA = +10, RSI > 70 overbought = +10, etc.)

Step 8: Generate Structured Trade Setup Output

Every analysis must conclude with this structured output format:

## Trade Setup: [LONG/SHORT] [Asset] — [Timeframe]

### Confluence Score: [XX/100] — Grade [A+/A/B/C/F]

### Market Context
- Regime: [Trending/Range-bound/Volatile]
- Higher TF Bias: [Bullish/Bearish/Neutral]
- Key Narrative: [brief description]

### Entry
- Entry Price: $X.XX
- Entry Type: [Limit at support / Stop-entry above resistance / Market]
- Entry Trigger: [specific condition that must occur]

### Risk (see risk-management skill for sizing)
- Stop-Loss: $X.XX ([method]: [X.X] × ATR / below [level])
- Risk per Unit: $X.XX
- R:R Ratio: X.X:1

### Targets
- Target 1: $X.XX (partial: take 50% off)
- Target 2: $X.XX (move stop to breakeven)
- Target 3: $X.XX (trail stop)

### Supporting Signals
1. [Signal 1]: [value/condition] — [bullish/bearish] [+X points]
2. [Signal 2]: [value/condition] — [bullish/bearish] [+X points]
...

### Invalidation
- Setup invalid if: [specific condition, e.g., "price closes below $X on daily"]
- Time invalidation: [setup expires after X bars/days if not triggered]

### Crypto-Specific (if applicable)
- Funding Rate: [X.XX%] → [interpretation]
- OI Trend: [rising/falling] → [interpretation]
- Liquidation Levels: [above/below at $X]

Anti-Patterns

DO NOT do these — they destroy technical analysis edge:

1. Indicator overload: Using 10+ indicators that all say the same thing (e.g., RSI + Stochastic + CCI are all momentum oscillators). Use one from each category: trend, momentum, volume, volatility.

2. Curve-fitting parameters: Changing indicator periods to make past signals look perfect (e.g., “RSI(7) works better on this chart”). Stick to standard periods (14 for RSI, 12/26/9 for MACD, 20 for Bollinger) unless backtested on out-of-sample data.

3. Ignoring the higher timeframe: A 5m buy signal means nothing if the daily chart is in a downtrend. Always check at least one timeframe higher.

4. Trading every pattern: Not every head-and-shoulders is real. Require volume confirmation + breakout close beyond the neckline. Patterns without volume are noise.

5. Anchoring to a bias: Seeing only bullish signals because you want to buy. Score the bearish case too — if bearish confluence is also high, the setup is ambiguous.

6. Ignoring regime: RSI overbought is NOT a sell signal in a strong uptrend. Bollinger upper band touch is NOT a short signal during a momentum move. Match strategy to regime.

7. No invalidation level: Every setup must have a clear point where it is wrong. “It could still work” is not analysis.

Validation Checkpoints

Input Validation

• Asset and timeframe(s) specified
• Sufficient historical data available (minimum 200 bars for SMA/EMA, 50 bars for patterns)
• OHLCV data is clean (no gaps, correct timezone)
• Higher timeframe data available for MTF analysis
• Market hours/session context known (crypto = 24/7, equities = market hours)

Output Validation

• Market regime identified with supporting evidence
• At least 3 indicators computed from different categories (trend, momentum, volume)
• Support/resistance levels mapped with strength scores
• Multi-timeframe alignment assessed
• Confluence score calculated with itemized scoring
• Trade setup in structured format with entry, stop, target
• Invalidation conditions defined
• R:R ratio meets minimum for strategy type (see Risk Management)
• Crypto-specific indicators included if analyzing crypto asset

Example

User: “Run technical analysis on BTC/USDT — looking for a swing trade setup on the daily chart.”

Analysis:

## Trade Setup: LONG BTC/USDT — Daily

### Confluence Score: 72/100 — Grade A

### Market Context
- Regime: Trending (ADX = 28, above 25 threshold)
- Higher TF Bias: Bullish (Weekly: price > 50 SMA > 200 SMA, making HH/HL)
- Key Narrative: BTC pulled back to 50 SMA on daily after making new highs. Funding rates neutral, suggesting spot-driven rally rather than leveraged.

### Entry
- Entry Price: $64,200 (limit order at 50 SMA + daily demand zone)
- Entry Type: Limit at dynamic support
- Entry Trigger: Daily candle prints bullish engulfing or hammer at $64,000-$64,500 zone

### Risk
- Stop-Loss: $61,100 (2.5 × ATR(14) below entry; ATR = $1,240)
- Risk per Unit: $3,100
- R:R Ratio: 2.9:1

### Targets
- Target 1: $70,000 (prior swing high — take 40% off, +$5,800)
- Target 2: $73,200 (1.618 Fibonacci extension — take 30% off, move stop to $64,200)
- Target 3: $78,500 (measured move from consolidation range — trail stop at 2× ATR)

### Supporting Signals
1. Weekly trend: Price > 50 > 200 SMA, HH/HL structure — bullish [+10]
2. Daily 50 SMA: Price pulling back to dynamic support — bullish [+10]
3. RSI(14): 42 — pulling back from overbought, not yet oversold — neutral [+5]
4. RSI hidden bullish divergence: Price HL, RSI LL on daily — continuation signal [+10]
5. MACD: Still above zero line, histogram contracting — momentum slowing but trend intact [+5]
6. Volume: OBV holding above its 20-period MA — accumulation intact [+5]
7. Bollinger Bands: Price at lower band in uptrend — buy-the-dip signal [+5]
8. Support zone: $63,800-$64,500 (3 prior bounces, 0.382 Fib, 50 SMA confluence) — strong (score 8) [+10]
9. Funding rate: +0.005% (neutral, no extreme) — no signal [+0]
10. OI declining + price declining: Long liquidation, weak sellers — potential bounce [+5]
11. Stochastic: %K at 25, approaching oversold — supportive [+2]
12. Bull flag: 3-week flag pattern on daily, flagpole = $12K — target $76K [+5]

### Invalidation
- Setup invalid if: Daily close below $60,000 (200 SMA and flag bottom)
- Time invalidation: If entry not triggered within 5 daily bars, reassess

### Crypto-Specific
- Funding Rate: +0.005% → Neutral (no leverage signal)
- OI Trend: Declining 8% over 3 days → longs being flushed (contrarian bullish)
- Liquidation Levels: $58K large long liquidation cluster, $72K large short cluster (price magnet above)