Testing Horizontal Support and Resistance Zones on Cryptocurrencies

We examine the price behavior of three cryptocurrencies around algorithmically derived horizontal support and resistance zones. The dataset considered in this study is composed of daily prices of Bitcoin, Ethereum, and BNB for a period spanning from 2018 to 2022. We find in our sample that prices are more likely to bounce on support than on resistance zones. Three dynamic trading strategies based on price bounces are also proposed, tested, and compared with a buy-and-hold benchmark. Results are mixed with two out of the three proposed strategies performing better (in terms of risk-adjusted returns) than the benchmark, in only one of the three examined series.