News provides the "why"—the catalyst that moves prices. Technical analysis provides the "where" and "when"—the optimal levels for entry, exit, and risk management. Combining both creates a powerful framework that outperforms either approach alone.
This guide shows you how to integrate technical analysis into your news trading for higher probability, better-timed, and more profitable trades.
Why Combine Technical and News Analysis?
The Limitations of Each Alone
News Trading Only: - Tells you what happened - Doesn't tell you optimal entry price - No framework for stop placement - Difficult to assess if move is overextended
Technical Analysis Only: - Shows patterns and levels - Doesn't explain why moves happen - Can be invalidated by surprise news - No context for sudden moves
The Combined Advantage
| Element | News Provides | Technicals Provide |
|---|---|---|
| Direction | Catalyst and bias | Confirmation |
| Entry | Timing (when to look) | Exact level |
| Stop Loss | — | Logical levels |
| Target | Magnitude estimate | Resistance levels |
| Risk/Reward | — | Calculated setup |
Framework: Technical Levels for News Trades
Support and Resistance
The most important technical concept for news trading.
How to Use:
For Long Trades (Bullish News): - Enter near support levels → Better risk/reward - Target resistance levels → Realistic profit expectations - Stop below support → Logical invalidation
For Short Trades/Exits (Bearish News): - Support levels may hold → Be cautious shorting into support - Breaking support → Accelerated downside - Target next support → Profit-taking zones
Example:
Bullish news breaks for Token X
Current price: $10
Key support: $9
Key resistance: $13, $15
Trade Setup:
- Entry: $10 (or wait for $9.50 on pullback)
- Stop: $8.50 (below support)
- Target 1: $13 (first resistance)
- Target 2: $15 (major resistance)
- Risk: $1.50, Reward: $3-5 (2:1 to 3.3:1)
News tells you direction. Support and resistance tell you where to enter, where to exit, and where you're wrong.
Trend Analysis
Is the news working with or against the trend?
News With Trend: - Higher probability of success - Extended moves more likely - Can use larger position sizes
News Against Trend: - Lower probability - Likely to be shorter-lived - Use smaller positions, quicker exits
Assessing Trend: - Higher highs and higher lows = uptrend - Lower highs and lower lows = downtrend - Price above/below 50-day MA - Multiple timeframe confirmation
Moving Averages
Use MAs for dynamic support/resistance and trend confirmation.
Key Moving Averages: - 20-day MA: Short-term trend - 50-day MA: Medium-term trend - 200-day MA: Long-term trend
Application to News Trading:
Entry: - Pullback to MA after bullish news = entry opportunity - MA acting as support = add to position
Exit: - Close below key MA = warning sign - Cross below 20 MA = short-term exit - Cross below 50 MA = medium-term exit
Example:
Bullish news causes spike
Price pulls back to 20-day MA
MA holds as support
Entry signal: Go long on MA bounce
Stop: Below the MA
Technical Indicators for News Trading
RSI (Relative Strength Index)
Measures overbought/oversold conditions.
Application:
| Scenario | RSI Level | Action |
|---|---|---|
| Bullish news + RSI oversold (<30) | Excellent entry | Full position |
| Bullish news + RSI neutral (30-70) | Good entry | Standard position |
| Bullish news + RSI overbought (>70) | Risky entry | Reduce size or wait |
Best Use: Avoid entering bullish trades when RSI is already overbought—the move may be extended.
Volume Analysis
Volume confirms the validity of news-driven moves.
Volume Signals:
High Volume on News Spike: - Confirms genuine interest - Move more likely to sustain - Supports larger position
Low Volume on News Spike: - Lack of conviction - Higher reversal risk - Use caution, smaller size
Volume on Pullback: - Declining volume = healthy pullback - Increasing volume = distribution (bearish)
MACD (Moving Average Convergence Divergence)
Momentum and trend confirmation.
Application: - MACD cross up after bullish news = momentum confirmation - MACD divergence = warning of weakening trend - MACD histogram expanding = strengthening momentum
Practical Combinations
Combination 1: News + Support Entry
Setup: - Bullish news breaks - Price at or near support level - RSI not overbought
Why It Works: - News provides direction - Support provides low-risk entry - Technical stop below support
Execution:
1. Bullish news detected
2. Check: Is price near support?
3. Check: RSI below 70?
4. If yes → Enter with stop below support
5. Target: Next resistance
Combination 2: News + Trend Confirmation
Setup: - News aligns with existing trend - Price above key moving averages - Technical breakout coincides with news
Why It Works: - Trend continuation higher probability - Technical breakout + catalyst = powerful combination - Multiple factors aligned
Execution:
1. Identify existing uptrend
2. Bullish news breaks
3. Confirm price above 20/50 MA
4. Enter on continuation
5. Trail stop with moving average
Combination 3: News + Overextension Fade
Setup: - News causes extreme spike - RSI deeply overbought (>80) - Price far above MAs - Volume declining after spike
Why It Works: - Technically overextended - Reversion likely - Clear levels for stops and targets
Execution:
1. Major news spike (>30%)
2. RSI above 80
3. Price >30% above 20 MA
4. Volume declining
5. Short with stop above high
6. Target: 20 MA or 50% retracement
The best trades occur when news direction and technical picture align. News against technicals (bullish news in downtrend) requires more caution.
Building a Combined Checklist
Before entering any news trade, run through this technical checklist:
Entry Checklist
| Factor | Check | Impact |
|---|---|---|
| Near support/resistance? | Entry near support (long) | Better risk/reward |
| RSI level? | Not extreme opposite direction | Avoid overextension |
| Trend alignment? | News direction matches trend | Higher probability |
| Volume confirmation? | High volume on move | Validates interest |
| MA position? | Price above/below key MAs | Trend context |
Exit Checklist
- [ ] Hitting predetermined target (resistance)?
- [ ] RSI reaching opposite extreme?
- [ ] Volume divergence (price up, volume down)?
- [ ] Breaking key support/MA?
- [ ] Contradicting news?
Timeframe Considerations
Different timeframes serve different purposes:
For Entry Timing
Lower Timeframes (5-15 min): - Fine-tune entry price - Identify intraday support - Spot immediate momentum
For Trade Management
Medium Timeframes (1-4 hour): - Key swing levels - Trend structure - Stop placement
For Overall Context
Higher Timeframes (Daily/Weekly): - Major support/resistance - Long-term trend - Big picture perspective
Recommended Approach:
1. Higher timeframe: Identify major levels
2. Medium timeframe: Plan entry zone and stops
3. Lower timeframe: Execute entry precisely
Common Mistakes to Avoid
Mistake 1: Ignoring Technicals in Excitement
Problem: News breaks, you enter immediately without checking chart.
Solution: Always check key levels before entering. 30 seconds of chart analysis can save significant losses.
Mistake 2: Fighting Clear Technical Levels
Problem: Bullish news but price at major resistance.
Solution: Wait for breakout confirmation or pullback. Don't assume news will overcome all resistance.
Mistake 3: Over-Complicating
Problem: Using 10 indicators that give conflicting signals.
Solution: Keep it simple. Support/resistance + one momentum indicator + volume is usually enough.
Mistake 4: Ignoring News for Pure Technicals
Problem: Taking technical setup without understanding news context.
Solution: Know what's driving the move. Technicals work best when combined with fundamental understanding.
Practical Application Example
Scenario: Major partnership announced for Token ABC
Step 1: Assess News - Type: Major partnership (significant) - Expected impact: 20-40% potential - Duration: Multi-day opportunity
Step 2: Check Daily Chart - Current price: $5.00 - Support: $4.50, $4.00 - Resistance: $6.00, $7.50 - 50-day MA: $4.80 (price above = bullish) - Trend: Uptrend (higher lows)
Step 3: Check Indicators - RSI: 55 (neutral, room to run) - Volume: Spiking on news (confirms interest) - MACD: Crossing bullish
Step 4: Plan Trade
Entry: $5.00-5.20 (current, immediately after news)
Alternative entry: $4.80 if pulls back to MA
Stop: $4.40 (below support)
Target 1: $6.00 (resistance, take 50%)
Target 2: $7.50 (major resistance, let rest run)
Risk: $0.60-0.80
Reward: $1.00-2.50
R:R: ~2:1 to 3:1
Step 5: Execute and Manage - Enter position with defined stop - Monitor for follow-through - Adjust trailing stop as trend develops
Conclusion
Technical analysis transforms news trading from reactive to strategic:
- Support/Resistance defines entry, exit, and stop levels
- Trend analysis confirms if news aligns with momentum
- Indicators warn of overextension and confirm strength
- Volume validates the genuineness of moves
- Multiple timeframes provide complete picture
The best news trades occur when: - News provides clear directional catalyst - Technical levels offer favorable entry - Trend aligns with news direction - Indicators confirm without overextension
Neither approach is complete alone. Together, they create a robust framework for consistent, well-managed news trading.
TradeFollow handles the news detection, giving you time to analyze the technical setup before executing your optimized trade plan.