Crypto Update: NEO Appears to Have Quietly Carved a Bottom and Reversed Its Trend
In technical analysis, prices move in trends and they remain in effect until a clear reversal occurs. In the case of the NEO/USD, the pair has been in a downtrend since February 2, 2018 when it took out support of $125. This triggered the rounding top reversal pattern. From that point, the market followed the trend as it posted lower highs and lower lows.
However, those days might be over. In this article, we’ll reveal how NEO may have quietly carved a bottom and effectively ended its downtrend.
NEO Breakout from a Large Falling Wedge
On our June 28 trade recommendation, I stated that NEO would very likely carve a bottom between $25 – $30. After all, this a key support area. This price level has never been breached since late September 2017. It is also the price level where early market investors accumulated positions.
Breakout on the Daily Chart
Another tenet of technical analysis is that history tends to repeat itself. If people bought between $25 – $30 last year, it is also possible that they will buy again if the market visits that price level. Bulls did not disappoint as they came in droves once the market dropped to this area.
Daily chart of NEO/USD
This sudden surge in volume inevitably pushed the price higher. Consequently, NEO/USD broke out of the large falling wedge pattern, which has kept the market bearish for over five months.
Breakout on the Weekly Chart
This breakout is also noticeable on the weekly chart. What’s astonishing in the weekly chart is the detachment of the weekly candle’s body from the 8-day and 21-day moving averages. The detachment means that the price plummeted faster than it should have.
From this perspective, the price will most likely climb in the coming weeks. This would enable the 8-day and 21-day moving averages to reattach to the weekly candle’s body. Considering the distance of the weekly candle to the moving averages, this gives us reason to believe that the breakout will show us more than just a dead cat bounce.
Weekly chart of NEO/USD
Reversal on the 4-hour Chart
The final nail in the coffin of the bears is the remarkable reversal on the 4-hour chart. As you can see in the chart below, NEO/USD took out resistance of $38 on July 4 and triggered the large inverse head and shoulders reversal pattern. This enabled the market to rally to as high as $48.90 on the same day.
While NEO pulled back and briefly moved below $38, bulls fought back and effectively turned the resistance into support. This serves as the confirmation of the breakout. More importantly, it ushers the beginning of a new trend in the market.
4-hour chart of NEO/USD
The NEO/USD pair has been in a downtrend for over five months but it appears that those days are over. The breakout from the large falling wedge pattern on the daily and weekly charts plus the breakout from the inverse head and shoulders pattern on the 4-hour chart give us confidence that the market has effectively reversed its trend.
Featured image courtesy of Shutterstock.