Crypto Update: Buy Signals Pop Up as Coins Recover from Friday’s Plunge

Despite Friday’s steep sell-off, the major cryptocurrencies held up well during the weekend, and today, they even managed to recover most of their losses, with several top coins triggering short-term buy signals in our trend model. After the overbought short-term momentum readings were cleared, the majors surged higher today in early trading, and although we haven’t seen signs of significant bullish follow-through, with the confirmed swing lows, the immediate outlook turned bullish in most cases.

That said, the bearish long-term pressures combined with the lengthy counter-trend rally still create a risky environment for bulls, and trades should only consider small, speculative positions here, while applying strict risk management rules. Odds continue to favor a broad and steep decline in the coming weeks, even as most of the short-term uptrends remain intact in the segment, and the bullish short-term momentum could still carry the coins higher.

The fact that Bitcoin regained its relative strength, getting close to its recent swing high today is a plus for bulls concerning the coming days. Until Bitcoin remains strong, the other short-term leaders such as Etherereum, Dash, and EOS could continue to shine, but the currently lagging coins like Litecoin and Monero should be avoided due to the downside risks.

BTC/USD, 4-Hour Chart Analysis

Bitcoin’s somewhat surprising quick recovery restored the bullish short-term trend in the most valuable coin’s market following the plunge below the previously dominant steep uptrend. With today’s spike higher, BTC recaptured the $7600 level, triggering a short-term buy signal while propelling the smaller coins higher as well.

Until BTC respects Friday’s swing low near $7000 (not the spike low near $6250), the short-term uptrend remains intact, despite the bearish long-term setup, but the downside risks are still very high, and a move below structurally important $5850 is still likely in the coming weeks, even in the case of another swing higher. Further support is found near $6750, $6500, $6100, and $6000, while the recent swing while resistance is ahead near $8400, $9000, and $9200.

ETH/USD, 4-Hour Chart Analysis

Ethereum continues to show relative strength, which together with BTC’s strength might be enough to extend the rally in the coming days. ETH continues to trade in a steep short-term uptrend and as the coin cleared the overbought momentum readings and recovered above $250, it’s now on a short-term buy signal in our trend model.

The coin is still in a hostile long-term technical position, and although the short-term momentum could still carry it higher, the risk of a steep and durable sell-off is high in the coming weeks. Ethereum is currently trading just below the $260 resistance, with further levels ahead at $275, $300, and, $330, while support is found near $230, $200, and $180.

Ripple Recaptures $0.40, as Litecoin Remains Stable

XRP/USD, 4-Hour Chart Analysis

Ripple has been the most volatile major this week, first surging by 50% up to $0.48, and quickly shedding one-third of its value to bottom out near $0.36 on Friday. Now the coin is back above the $0.40 level, eyeing the lower boundary of the crucial long-term zone between $0.42 and $0.46.

Thanks to the rebound, the coin is back on a short-term buy signal, and due to its long-term relative weakness, traders should focus on the relatively stronger coins, even though the volatility in XRP is tempting for short-term positions. Above the long-term zone, further resistance is ahead near $0.51 and $0.54, while support below $0.40 is found near $0.3750 and $0.3550.

LTC/USD, 4-Hour Chart Analysis

Litecoin managed to hold up above the $85 level despite its recent relative weakness, and although the bounce wasn’t enough to trigger a buy signal in our trend model yet, a move above $98 would be enough for an upgrade, in light of the segment-wide recovery. Should the coin score a new swing high, it could test the $125 resistance in the coming days, but the long-term outlook remains negative for the LTC.

Our trend model remains on a long-term sell signal too, despite the lengthy counter-trend rally, and downside risks are very high following the parabolic moves in the top coins. Initial support is found near $90, and below $85, further levels are found between $72.50 and $75, while above the previous swing high, the next level is resistance is ahead near $110.

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.

Trader 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.