Crypto Update: Majors Bounce Back but Technicals Still Point Lower

The cryptocurrency segment saw an oversold bounce today, with the coins that suffered the hardest blows in recent days outperforming their peers. From a technical perspective, the bounce has been weak and the trend reversals that were confirmed by the sizable decline remain in place. The fact that the recently stronger coins, and Bitcoin, in particular, couldn’t show relative strength confirms the counter-trend nature of the bounce.

With that in mind, traders should remain defensive here, and as our trend model remains on sell signals on both time-frames, no new positions should be opened even in the relatively stronger coins. That said, the coming days will be important for the fate of the larger scale rally, as another strong-momentum dip would likely be enough to confirm the broader topping pattern that we have been anticipating in recent weeks.

The overwhelming majority of the smaller coins have been moving in sync with the top digital currencies and following the period of severe altcoin weakness, market breadth remains bearish, and without widespread signs of technical strength, even the immediate outlook is negative. While a recovery is still possible here, downside risks are high, and even in the case of a stronger rebound, the freshly formed short-term downtrends would likely remain intact.

BTC/USD, 4-Hour Chart Analysis

While Bitcoin briefly dipped below $11,000 overnight, it managed to recover above the $11,300 support/resistance level together with the broader market. Despite the bounce the coin failed to regain its relative strength, from a short-term perspective, even though it’s still in the most promising technical setup among the top coins.

Given the pronounced weakness in altcoins, traders should still not enter new positions in the most valuable in even though the previous swing is still in no immediate danger. A sustained recovery above $12,000 would trigger a renewed short-term buy signal in our trend model, but for now, it remains on sell signals on both time-frames. Below $11,300, further strong support zones are still found near $10,000, $9400, $9200, and $8400, with resistance levels ahead near $13,000 ahead near the prior swing high just below $14,000.

XRP/USD, 4-Hour Chart Analysis

Ripple recovered briefly above the $0.35 level, leading the bounce following its severe decline, and while it scored the largest gain today, percentage-wise, it remains in the weakest position from a technical perspective. The coin failed to recapture the key $0.3550 level, although it’s holding up clearly above the $0.33 level. The short-term momentum indicators are still somewhat oversold and that could point to further consolidation ahead of the next leg lower.

Our trend model remains on sell signals on both time-frames, and while the coin might recapture the $0.3550 level, temporarily, a more sustained bounce is unlikely due to the apparent selling pressure.  Below $0.33, further support is found near $0.32, $0.30, $0.28, and $0.26, while above $0.3750 the next resistance zone is ahead near $0.40.

Ethereum Struggles with $275 Level as Litecoin Hovers Above $100

ETH/USD, 4-Hour Chart Analysis

Ethereum recovered slightly above the key $275 level but it failed to show meaningful strength despite the broad rally attempt. The coin couldn’t distance itself from the strong resistance and despite the current consolidation, the outlook remains bearish, and the new short-term downtrend is intact. Traders shouldn’t enter new positions here even though further consolidation is possible and a recovery is not off the table.

In case of another downswing, the $230 level could soon be tested by ETH, and although the $260 level provides support above that, in light of the long-term setup, downside risks remain dominant here. Below $230, further support levels are found near $200 and $180, while above the initial resistance zone near $275, further levels are ahead near $300 and $330.

LTC/USD, 4-Hour Chart Analysis

Litecoin managed to bounce back above the $100 level but it remains shy of the $110-$112 zone, and it remains among the weaker coins from a short-term perspective. Similarly to the other early leaders of the rally, it’s still holding on to most of this year’s gains, but with the short-term now being reversed, downside risks continue to be very high here. Even though LTC could still resume the rising trend, traders should remain cautious here even in the case of a stronger rebound.

Our trend model is still on clear sell signals on both time-frames, and a test of the key $85-$90 support seems likely in the coming days. Below that, further zones are found near $75 and $64, while resistance above $112 is ahead near $125, $140, and $150.

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.