Crypto Update: Majors Threaten Key Support Levels as Weekend Rally Fades

While most of the major cryptocurrencies are still on short-term buy signals in our trend model, despite today’s downgrades, the sell-off that started today in early trading has the potential to morph into a larger-scale move. The momentum of the rally that carried the top coins to over one-year highs seems to be fading, even though Thursday’s spike lower was met with buying near key technical support. The bearish long-term forces are more and more likely to overwhelm the counter-trend rally, and as we pointed out earlier, traders should stick to strict risk management rules in this situation.

Should the pattern of highs and higher lows break and key support levels would start to fall, the sell-off could quickly accelerate, and the momentum might swiftly switch bearish. Our trend model remains on long-term sell signals for the whole segment and despite the lengthy rally, we still view the current rally as the correction of last year’s historic sell-off. That said, the rally could still resume, but even in the case of another short-term swing low, traders should only consider smaller, speculative positions in the relatively stronger coins.

BTC/USD, 4-Hour Chart Analysis

Bitcoin is trading right at the $8000 level following the post-US-close dip, and although the coin is still clearly above the key $7600-$7800 support zone, it didn’t manage to clear the recent swing high and a drop below $7800 could lead to a swift bearish move. The coin is still on a short-term buy signal but as long-term risks are mounting, traders should only hold small positions in the coin, as we still expect a dip below the structurally important $5850 level in the coming weeks.

In case of yet another quick recovery, the coin could still reach the $9200 resistance, with another zone above zone ahead at $10,000, but the coin needs to hold above the initial support zone to keep the counter-trend move intact. Below that, the first manor support zone is at $7000 with further zones near $6750 and $6500.

ETH/USD, 4-Hour Chart Analysis

Although Ethereum got close to the $275 level over the weekend, it failed to test the previous swing high and today it dipped back to the $250 level, threatening with another test of the key $2230 support. While our trend model is still on a short-term buy signal, a sustained dip below Friday’s low would warn of a weakening of the short-term uptrend.

With the hostile long-term picture in mind, downside risks are already high, but a clear move below $230 would likely mean that the coin will be headed towards the previous bear market low. Should buyers step in yet again near the key support zone, the recovery could still carry the coin up to the $300 and even the $330, but given the sustained counter-trend move, a durable break-out is unlikely.

Ripple Fails at $0.46 as Litecoin’s Momentum Fades

XRP/USD, 4-Hour Chart Analysis

While Ripple attempted yet another breakout above the key long-term $0.46 resistance level, the relatively weak coin failed to sustain the late-week rally today. The coin is currently testing the $0.42 level, and a move below the $0.40 level and last Friday’s swing low would threaten with a larger-scale dip, in light of the segment-wide trends.

With the hostile long-term technical picture in mind, XRP remains on a sell signal even on the short-term time-frame, and even in the case of a recovery, traders should continue to focus on the relatively stronger coins, as the bear market in Ripple is still likely to resume soon. Above the $0.46 level and the mid-May swing high, further resistance levels are ahead at $0.51 and $0.56, while below $0.40, key support zones are found at $0.3750, and $0.3550.

LTC/USD, 4-Hour Chart Analysis

Litecoin dipped below the short-term support level near $110 today in late trading after showing relative weakness during the weekend despite the renewed short-term buy signal in our trend model. The weakness of one of the early leaders of the counter-trend move is a negative sign for the whole segment, but above $100, the coin remains on a buy signal.

The short-term uptrend is still intact, and a move above last week’s high would likely lead to a test of the $125 level, with a possible rally up the next major zones near $140 and $150, despite the mounting downside risks. Traders should still only consider opening smaller, speculative positions in LTC, especially that we have been seeing worrying weakness in the other leaders such as EOS and IOTA today. Below $100, strong support is found between $85 and $90, with further levels near $75 and $64.

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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.

Author:
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.