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Coming Week: Stocks Mostly Bullish, Cryptocurrencies Going for New Records?

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Asset Current Value Weekly Change
S&P 500 2355 -0.30%
DAX 12225 -0.71%
WTI Crude Oil 52.23 2.78%
GOLD 1257.50 0.81%
Bitcoin 1180 9.20%
EUR/USD 1.0599 -0.53%

 

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 5 Things to Watch Next Week

  1. Will the Syrian situation escalate further?

Although wars are far from being 100% negative for stocks, the Syrian conflict has the potential of becoming a threat to global sentiment. Any involvement of Russia against US forces could turn into a very serious power struggle. Despite the fact that it would be beneficial for all sides to reach a stable state in the already destroyed country, it’s hard to see a quick resolution without international cooperation.

  1. Will Yellen stop the Dollar rally?

The US Dollar has been among the strongest major currencies this week despite the recent move towards monetary tightening by the ECB and the BOJ. The first major event of the week will be the speech of Fed chair Janet Yellen, and any hint of caution by the most powerful central banker could lead to a quick decline in the value of the Greenback.

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The Dollar Index (DXY) is creeping towards its prior highs, Daily Chart

  1. What’s next for Bitcoin?

The most important cryptocurrency had a blowout week as it rallied relentlessly through several technical levels, despite the sometimes weakening momentum. The negative change in global sentiment in the second half of the week also helped the newest safe-haven asset. Although the technical setup is mixed, there is a clear chance of a powerful thrust towards the all-time high near $1300. The first days of the week could prove crucial for BTC traders.

  1. Will US stocks prove literally bulletproof?

Although stock markets saw some weakness after the Syrian attacks, they ended the week only with slight losses, even as the global leader, the DAX, experienced a correction. US stocks continue to hover just below their all-time highs, and it is possible that we will see a thrust to new highs once again, barring a serious political escalation between Russia and the US.

  1. A busy Friday despite the Easter- break.

With several European markets being closed on Friday (and on the next Monday) financial markets might be in a limbo towards the end of the week, but the most awaited US economic numbers will still come out on the last session before Easter. The retail sales and CPI reports are both closely watched by the Fed, and in the current market, the Fed is arguably the most influential player.

In Focus: Cryptocurrencies

 

1-month performance of the main cryptocurrencies, (% gains)

Litecoin is consolidating near the $10 level this weekend, and it jumped to the second place in the monthly performance chart of the major altcoins after its strong breakout, teaming up with Ethereum with a gain of 180%. Ethereum has been relatively quiet this week as it remains in a holding pattern below the $50 level. Bitcoin’s climb towards the $1200 level was impressive last week, but the dominant player of the market might face strong resistance before a charge towards its all-time high.

Dash and Monero have been glued together recently and they are both drifting higher since Friday, and a renewed rally is a distinct possibility for both currencies next week. Ripple is, not surprisingly, the leader of the monthly performance chart, even after the epic “pump-and-dump” breakout that ended in a swift and painful more than 50% correction. The overall picture is still positive for the cryptocurrency market as the majors are experiencing strong inflows, even if the volatile environment makes it that much harder to look at the big picture.

Currency Monthly Volume Market Cap
Bitcoin 11,156 19,096
Ethereum 4,783 3,976
Ripple 831 1,297
Dash 1,001 486
Litecoin 1,374 479
Monero 356 296

 

Key Economic Releases of the Week

Day Country Release Expected Previous
Monday US Janet Yellen Speech
Tuesday UK CPI Index 2.20% 2.30%
Tuesday GERMANY ZEW Economic Sentiment 13.2 12.8
Wednesday CHINA CPI (yearly) 1.1% 0.8%
Wednesday UK Average Earnings 2.1% 2.2%
Wednesday UK Unemployment Rate 4.70% 4,7%
Wednesday CANADA Base Interest Rate 0.50% 0.50%
Wednesday US Crude Oil Inventories 1.6 million
Thursday AUSTRALIA Employment Change 20,300 -6,400
Thursday AUSTRALIA Unemployment Rate 5.90% 5.90%
Thursday CHINA Trade Balance 76 billion -60 billion
Thursday CANADA Manufacturing Sales -0.40% 0.6%
Thursday US PPI (monthly) 0.00% 0.3%
Thursday US Initial Jobless Claims (weekly) 242,000 234,000
Thursday US UOM Consumer Sentiment 97.1 96.9
Friday US Core CPI 0.00% 0.20%
Friday US Core Retail Sales 0.20% 0.20%
Friday US Retail Sales 0.10% 0.10%

 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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Analysis

Long-Term Cryptocurrency Analysis: Correction Deepens but Leaders Remain Stable

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As the major cryptocurrencies got hit hard this week, losing around 20% on average, the long-term picture in the segment got close to an entry point for investors. The overbought readings that developed during the late-April rally are now cleared and although the short-term trends are still clearly negative, we still expect the coins to resume the recovery. With that in mind, long-term investors could start accumulating the relatively stronger coins.

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On a negative note, even the leaders violated key support levels during this week’s selloff, but the secular long-term trends are not yet in danger. The prior leaders Ethereum, EOS, and IOTA are still in the center of attention, as we expect them to form a bottom soon. Bitcoin and the other relatively weak coins, like Litecoin, Monero, Dash, and NEO are still lagging the form a technical perspective, but they are also well above the support levels that would indicate an end of the secular bull market.

BTC/USD, Daily Chart Analysis

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Bitcoin is below the key $7650-$7800 support level and it remains the biggest drag on the market, despite a brief period of relative strength this week. The upper boundary of the base pattern that we identified in April is found near $6150, with a weaker zone around $6500, and with the short-term trend clearly being negative, the latter might be tested before a bottom forms. Further resistance is ahead at $8400, $8700, and between $9000 and $9200, and traders and investors still shouldn’t enter positions here.

ETH/USD, Daily Chart Analysis

Ethereum is testing the $555-$575 support zone after violating the $625-$645 range, with the declining short-term pattern being intact. A bottom near the $500 would still keep the recovery intact, but the correction low might already be in, and investors could already add to their holdings here. Further resistance zones are ahead between $735 and $780 and near $845, while support is found near $450.

(more…)

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 257 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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Analysis

Pre-Market: Oil Plunges Below $70 as Markets Mixed Before Long Weekend

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Financial markets are relatively calm today, despite the hectic week that was highlighted by the Turkish currency crisis, wild swings in bonds, and a step back in US-North Korean relations. Stock markets turned lower globally, with US equities outperforming the rest of the world, essentially drifting sideways all week long, thanks to the slight correction in the Dollar’s rally, and the dip in Treasury yields that was triggered by the dovish Fed meeting minutes.

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S&P 500 Futures, 4-Hour Chart Analysis

Today, the durable goods report came out before the opening bell and although the headline number was a tad worse than expected the more important core figure beat the consensus estimate, helping the slightly dampening economic outlook, even as yields continue to fall, especially with regards to long-dated Treasuries.

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EUR/USD, 4-Hour Chart Analysis

Although emerging market currencies are way less volatile today than recently, despite the rebound in the Dollar, equities shed their early gains and are now slightly in the red. The all-important EUR/USD pair hitting yet another 6-month low near 1.1650, and the test of the key long-term 1.1450-1.15 zone looks more and more likely in the coming weeks, even as the pair is a bit oversold.

Energy Markets in Turmoil as OPEC Signals Production Increase Again

WTI Crude Oil, 4-Hour Chart Analysis

It seems that the crude oil market is in for a strategic switch yet again, as the OPEC, together with Russia made it clear today that the price of the Black Gold finally reached a desirable level. The cartel will be targeting a higher level of output later on this year in order to keep the US shale players under pressure by capping the advance in the key commodity’s market.

The WTI contract reached a 4-year high at $72 per barrel recently and the Brent contract which is more exposed to Middle East woes rose as high as $80 per barrel after trading below the $30 level just two years ago. The last phase of the advance extended above the level where a large portion of the shale plays turn profitable, and as global growth worries also surfaced, the commodity entered a selloff this week.

Gold Futures, 4-Hour Chart Analysis

Safe haven assets continue to be bid despite the relatively calm environment, and gold hit a two-week high today despite the bounce in the Greenback as buyers are back after the wash-out plunge below $1300. With the long-term setup and fundamentals still being favorable for the precious metal, the short-term downtrend line is in danger here.

As US markets will be closed on Monday, which usually favors an active session, volatility might remain high throughout the day.

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Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 257 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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Recommendations

Trade Recommendation: Intact Financial

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Technical Overview

  • Since double-bottoming in 2008 and 2009 at $26 (violet horizontal trendline in Figure 1), Intact Financial (IFC.TO) has enjoyed a four-fold increase. During the 2013, 2016 and 2018 corrections, the stock found support at a long-term trendline (support – green trendline; retests – green arrows).

Figure 1. IFC.TO Weekly Chart

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  • Zooming in, after topping in November’17, IFC completed a H&S pattern (tops – yellow ellipses, neckline – yellow trendline in Figure 2).
  • In January, March, April, and May, all up-moves halted at a well-defined short-term resistance (red trendline). Yesterday (May 25), the stock managed to break and close above the resistance.
  • Today, the stock closed in positive territory, whereas the Financial sector (TTFS.TO) declined by over 0.5%.
  • The $95 level had served as support on multiple occasions in 2018 (purple horizontal trendline and arrows).

Figure 2. IFC.TO Daily Chart

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Implications

  • The bounce off of the long-term support and the break above the short-term resistance are considered constructive.
  • The stock is expected to find support in the $95 – $96.50 range during pullbacks (i.e. at the red and purple trendlines).
  • The downward target from the H&S pattern was nearly met during the May decline (target – $92.25 – white vertical trendline in Figure 2, May 9 low – $92.65 – last purple arrow).

Outlook

  • Short-term bullish as long as the stock remains above $95
  • Long-term bullish as long as the stock remains above its long-term support (green trendline in Figure 1).

 Trade Recommendation

  • Buy the stock at current levels ($97.50 at EOD on May 24).
  • Target: Half at $101 (the January low which served as resistance in March – second red arrow). Other half at $108 (origin of the late 2017 decline).
  • Stop: Half upon a close below $95. Other half upon a close below the long-term support (currently at approximately $93.50).

Disclosure: No position yet but may initiate at any time. Will likely recommend the stock to my clients as a potential play within the financial sector.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.8 stars on average, based on 12 rated postsPublished author of technical research. In his work on price “gaps”, published in the 2018 International Federation of Technical Analysts’ Annual Journal, he developed a new technical tool for analyzing and trading the “gap” phenomenon – the “K-Divergence” (http://ifta.org/public/files/journal/d_ifta_journal_18). Besides obtaining a Master in Financial Technical Analysis, he has completed a BBA and an MBA from the Schulich School of Business in Toronto and has completed all exams for the CFA, CMT and CFTe designations. Currently, providing research to investment management and financial advisory firms. http://www.linkedin.com/in/konstantindimov




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