Crypto Update: XRP Conceals Strong Bullish Signals

Ripple (XRP/USD) was the toast of the cryptocurrency world last month as it climbed to as high as $0.80 on September 21, 2018. At that price level, the market was up by almost 225% from its 2018 low of $0.24646 on August 14. All over the internet, you could hear the chatter that Ripple is ready to dislodge Ethereum in the number two spot of market capitalization. Before these whispers became actual calls, Ripple dumped.

XRP/USD plummeted to as low as $0.2843 on October 11, 2018. The hype that surrounded the market just a few weeks ago was gone. Almost no one is talking about the market on social media. A closer look, however, shows that it deserves your attention.

In this article, we reveal how Ripple’s recent dump conceals strong bullish signals.  

Fade Before the Breakout

True range breakouts often happen after the market fades or pulls back. The fade accomplishes two things: it eliminates sellers and enables buyers to reload near the support. Here’s a quick example of this process happening on Stellar (XLM/USD):

Range breakout after the fade

Notice how Stellar struggled for days to take out resistance of $0.24. After the fade, however, it breached the resistance and broke out of the range.

The same process also happened to Ripple not too long ago. It struggled to go above $0.37 on August 18 so it pulled back. However, the fade was one of the facilitators of the big rally that sent the market to $0.80.

Ripple range breakout after the fade

Recently, we’ve seen Ripple fail to take out resistance of $0.60. As a result, the market nosedived. While this triggered the stop losses of numerous participants who bought the rally, we believe this move to be a strong bullish signal. We see this as the fade before the breakout rally.

Possible fade before the rally

This view comes after Ripple turned two resistances into support levels. We’ll explain more in the next section.

Resistance/Support Flips

Resistance/Support flips or R/S flips happen when a resistance is turned into a support. This is a bullish signal as it enables the market to create a new range and trend higher. Ripple has managed to create two R/S flips in two weeks.

Ripple R/S flips

The first R/S flip happened on October 11 when the market closed above $0.37. Notice how Ripple used the resistance of the old range as its new support. This new support is what we often call the bullish higher low setup. Now, with a higher low in place, the market was able to rally and flip resistance of $0.44 as its new support.

If the market stays above $0.44, it will create another higher low. This will attract more buyers and help Ripple trend even higher.

An R/S flip is one of the primary reasons why fades are healthy. They help the market establish a new base of buyers so it can trend higher and higher.

Cup and Handle Emerging Pattern

Considering all of these factors, we see Ripple creating a cup and handle reversal pattern. We expect the market to continue building a new base between $0.44 – $0.46 before trending higher. It will do the same process as it flips resistance of $0.50. Eventually, it is likely to take out $0.60 and ignite a new bull run.

Projected move of Ripple

Bottom Line

The recent Ripple dump may have triggered numerous stop losses. However, we believe this move to be bullish. The fade has enabled the market to flip two resistance levels into key support areas. If Ripple continues on this path, it will likely create a cup and handle reversal pattern and ignite a new bull run.

Kiril is a CFA Charterholder and financial professional with 5+ 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 funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, 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.