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Crypto-Bounce Continues as Central Bankers Toy with Markets

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Wednesday Market Recap

Asset Current Value Daily Change
S&P 500 2429 0.38%
DAX 12668 -0.02%
WTI Crude Oil 44.27 0.07%
GOLD 1253.00 0.43%
Bitcoin 2534 5.13%
EUR/USD 1.1335 -0.07%

Yesterday’s crazy afternoon, fueled by the newest cyber threat Petya and the plunge in the NASDAQ, is a thing of the past now, as global stocks have rebounded off their lows and trade broadly higher. European shares are still underperforming their global peers, as we expected, and the DAX finally broke below its long-standing trendline possibly pointing to a deeper correction. The Euro is on a rollercoaster ride this week, thanks to the European Central Bank’s summit in Portugal. Just today, the common currency surged to a 12-month high against the US Dollar before collapsing back towards yesterday’s close after another round of speeches regarding the Eurozone’s monetary policies.

EUR/USD 4-Hour Chart Analysis

Apart from the Euro, the Canadian Dollar is the biggest moving fiat currency once again as the rally fueled by the recent positive economic surprises continues in the “Loonie”.  Gold is still hovering around the $1250 level after Monday’s suspicious flash crash, and that might be a good sign for the metal, as it failed to gather downside momentum after the dip. Oil is consolidating near the $44 level, as the Saudi-Qatar crisis is on hold for now, with next week’s deadline for the ultimatum slowly approaching.

Cryptocurrencies

The crypto-market continues to heal after Monday’s scary dip, and the weakest link of that day, Ethereum, is showing signs of relative strength, as it approaches our target for the bounce at $300. While the long-term picture is getting close to neutral, more corrective action is likely before a move to new highs, although the actual lows are most likely in.  Small cap coins are also looking encouraging, while Dash remains the strongest looking major. We still suggest tracking the moves of Ethereum and Bitcoin as correlations could still jump in the case of another dip, as the correction phase runs its course.

Ethereum, 4-Hour Chart Analysis

Technical Picture

The DAX broke below the crucial support level that we pointed out recently and exited the long-term trend channel with the overnight dip. A test of the zone between 12,375 to 12,500 is the most likely scenario, and bulls should still wait before opening new positions in the benchmark. Yesterday’s strong decline in the NASDAQ could point to a broad correction in global stocks, and the strength of the Euro could further weigh on European equities.

DAX Index 4-Hour Chart Analysis

Key Economic Releases on Wednesday

Time, CET Country Release Actual Expected Previous
10:00 EUROZONE M3 Money Supply 5.0% 5.0% 4.9%
14:30 US Goods Trade Balance -65.9 bill -66.2 bill -67.1 bill
15:00 US Pending Home Sales 0.9% -1.3%
16:30 US Crude Oil Inventories -2.1 mill -2.5 mill

Key Economic Releases on Thursday

Time, CET Country Release Expected Previous
10:00 GERMANY Prelim CPI 0.0% -0.2%
14:30 US Final GDP 1.2% 1.2%
15:00 US Initial Jobless Claims 240,000 241,000

 
Featured image from 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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4.6 stars on average, based on 291 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

Crypto Update: Qtum’s Price Contraction Hints at a Massive Bull Run

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Qtum/Bitcoin (QTUM/BTC) is one of the biggest losers in cryptocurrency investing. It shred more than 76% of its value in seven months when it dropped to 0.001192 on July 12. With such a sharp slide, there’s no denying that the market is deep in bear territory. Nevertheless, long-term investors can find hope in the market’s habit of rallying after a deflating bear run.

In this article, we show how Qtum/Bitcoin uses price contractions and oversold conditions to stage massive rallies.

Falling Wedge in the Last Quarter of 2017

QTUM/BTC was bearish in September, October and November of 2017. The pair traded in a wide range between September to late October 2017 while generating lower highs and lower lows. However, the range got more and more tight until December 14. In three and a half months, the pair created a falling wedge.

2017 Fourth Quarter Daily chart of QTUM/BTC

The pair was able to break out of the pattern on December 15 after it recovered from extreme oversold readings. The selling relief combined with price contraction conspired to ignite a rally that rewarded bottom pickers with over 300% profits in less than a month.

Falling Wedge in the First Quarter of 2018

Gravity also works in financial markets. Often, the case is the greater the rise, the harder the fall.

As QTUM/BTC pulled back from its meteoric rise, the pair created another falling wedge structure on the daily chart. The market plummeted until the trading range was so tightly squeezed that there was no more room to go but up. Again, the market flashed extreme oversold readings before breaking out of the pattern.

2018 First Quarter Daily chart of QTUM/BTC

Falling Wedges in the Third Quarter of 2018

History repeats itself; that’s one of the main principles of technical analysis. So far, QTUM/BTC adheres to that tenet. It appears to be creating a third falling wedge as it respects key support of 0.0012. While doing so, it has recently given off extreme oversold signals.

2018 Third Quarter Daily chart of QTUM/BTC

But wait! There’s more!

A broader and more in-depth look at the daily chart of QTUM/BTC reveals that all three falling wedges mentioned above appear to be parts of a massive falling wedge. What’s astonishing is that the narrowest point of this gigantic falling wedge is at key support of 0.0012.

Daily chart of QTUM/BTC

Based on previous price movements, it is not difficult to imagine that this extreme price contraction can be the catalyst of a massive bull run.

Bottom Line

QTUM/BTC is in deep bear territory. However, history tells us that the pair might be out of the woods real soon. The formation of three falling wedge patterns reveal that the market has a habit of rallying after extreme price contraction. More importantly, the emergence of the large falling wedge on the daily chart suggests that QTUM/BTC may be on the cusp of a massive bull run.

 

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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3.7 stars on average, based on 191 rated postsKiril is a financial professional with 4+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and ETFs, as he does his own crypto research and is the subject matter expert at ETFdb.com. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.




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Analysis

Crypto Update: Bulls Hold Their Ground as Coins Settle Down

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Trading volumes and volatility declined substantially in the cryptocurrency segment this weekend, as the major coins are trying to hold the key support levels that are just below the current prices. For now, Bitcoin, Ethereum, and Ripple all managed to avoid a break below the June lows and the technical damage is limited among the smaller coins as well, despite the still dangerous setups on the long-term charts.

That said, the general character of the market is still bearish, with high correlations between the majors, and robust resistance levels capping the rally attempts in most cases. With all of those in mind, and given the still active short-term sell signals in our trend model, traders should still not enter new positions here, as a test of the lows is likely in the coming week.

The market is still missing a leadership that could turn the short-term trend around, and the relatively weak coins that have been leading the way lower in the recent period are still not showing signs of strength, despite the occasional short squeeze rallies.

BTC/USD, 4-Hour Chart Analysis

BTC tried to get back above the $6275 support/resistance level several times since falling below it on Thursday but the attempts all failed so far. The coin is still in a clear downtrend, although the previous lows haven’t been tested yet.

From a long-term perspective, a durable break below $5850 would signal a structural bear market, so the coming period will be crucial for the whole segment. Primary support is at $6000, while resistance is ahead at $6500, $6750, $7000, and $7350.

Still No Real Momentum Among Altcoins

ETH/USD, 4-Hour Chart Analysis

The basic setup among the largest altcoins is unchanged similarly to BTC, with Ethereum trading between the $400-$420 support zone and the $450 resistance level since the Monday plunge. The coin is holding up above the June low, and it’s still relatively strong from a longer-term standpoint compared to Bitcoin.

On the contrary, ETH is looking weak short-term, and that also points to the continuation of the declining segment-wide trend. ETH is facing further resistance near $500, while support below $400 is found at $380 and $360.

XRP/USDT, 4-Hour Chart Analysis

Ripple barely managed to avoid a break below the June lows, and the third largest coin remains very weak from a technical standpoint, and strong selling pressure is apparent in its market. The coin should stay above the $0.42 level to avoid major technical damage, and he coming days could be crucial for bulls, with strong resistance ahead around $0.45 and $0.51.

Featured image from Shutterstock

Disclaimer:  The analyst owns cryptocurrencies. He holds investment positions in the coins, but doesn’t engage in short-term or day-trading, nor does he hold short positions on any of the coins.

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

Forex Update: USD/INR Showing Signs of Weakness Yet Remains Bullish Long-term

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The US Dollar/Indian Rupee (USD/INR) pair has been in a strong bull run ever since it took out resistance of 53.50 in April 2012. The breakout ignited a massive rally that pushed the pair to as high as 69.528 in August 2013. In a little over year, investors raked in almost 30% in profits.

Unfortunately for buyers at this level, 69 proved to be a major resistance. Five years later, that resistance is still giving investors nightmares. The good news is time appears to be on the side of the bulls. In this article, we show why long-term investors shouldn’t lose sleep even though USD/INR appears to be heading down.

The Pullback of USD/INR is a Setup for a Comeback

USD/INR has looked unstoppable recently after it generated a higher low of 63.16 early this year. While the rally was impressive, the pair eventually ran into a brick wall at resistance of 69. So far, bulls look exhausted. It seems they don’t have what it takes to breach a resistance level that has stood for half a decade.

USD/INR Daily Chart

A quick look at the daily chart reveals multiple bearish signals. First and most important, bulls attempted several times to go above 69 but to no avail. The long red candle yesterday symbolizes their defeat.

On top of that, a bearish divergence emerged on the daily RSI. This is compounded by the bearish cross on the daily MACD. If that’s not enough, the 4-day, 8-day, and 21-day moving averages are all trending south.

As an investor, it is easy to lose your confidence in the market after seeing these signals. However, the incoming drop is actually good for the overall health of the market. It is very likely that bulls will take advantage of this temporary weakness and buy on dips. This sentiment is one of the reasons why we believe USD/INR remains bullish long-term.

The Emergence of a Large Continuation Pattern

Breakouts from multi-year consolidation periods often spark a rally that generates handsome returns to investors. This is what happened when USD/INR broke out of the inverse head and shoulders pattern in April 2012.

USD/INR Inverse H&S

Now, it seems that USD/INR is looking for a repeat performance while dancing to a different tune. The pair appears to be in the final leg down of a large ascending triangle pattern, thus explaining the short-term weakness. This is actually one of the best structures that can take down a major resistance like 69. The series of higher lows puts tremendous pressure on the resistance.

USD/INR Weekly Chart

As bulls hold on to positions, the supply in the market becomes more and more limited. This forces new investors to buy at higher price, hence the formation of higher lows. Eventually, the supply becomes so tight that even a five-year resistance like 69 won’t be able to withstand the onslaught of buyers.

When that happens, USD/INR is likely to explode like it did before.

Bottom Line

USD/INR might be on the way down. However, we believe that this pullback is nothing but a setup for a comeback. The impending retracement is most likely the last wave of an ascending triangle pattern. Investors can sleep soundly, confident that the market will likely reward them with substantial profits in the future.

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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3.7 stars on average, based on 191 rated postsKiril is a financial professional with 4+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and ETFs, as he does his own crypto research and is the subject matter expert at ETFdb.com. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.




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