Crypto Update: Short-Term Rally Collapses as Failed Break-Out Patterns Form

Crypto Fund Losses

The counter-trend rally that resumed yesterday following a shallow correction abruptly ended today in the cryptocurrency segment, as the major coins suddenly got smacked lower in a concerted fashion. The top digital currencies all lost more than 10% compared to their new swing highs, and most of them violated key support levels while breaking below the rising short-term trendlines as well.

As the recent rally didn’t change the bearish long-term setup in the segment, the failed move is not a surprise, but the momentum of the sell-off has been unexpectedly strong in the slightly illiquid weekend environment. Ethereum’s failed break-out above $160, together with Bitcoin’s failed move above the January swing high triggered the plunge from a technical perspective, and our trend model also switched to sell signals on the short-term time-frame.

The long-term sell signals in our model remained in place throughout the rally and although the current spike lower could turn out to be just a correction, given the still hostile long-term setup, traders shouldn’t enter new positions here, even in case of the relatively stronger coins.

ETH/USD, 4-Hour Chart Analysis

The leaders of the move hit their target levels ahead of the plunge, with most notably ETH topping the key $160 level, but the coin not just moved back below that level, but quickly violated the $145 support/resistance level as well. While the plunge halted right at the rising short-term trendline, given the momentum of the decline traders shouldn’t enter new positions here.

The long-term setup remained negative in ETH’s market, and odds continue to favor the continuation of the bear market, and even in the case of a quick recovery, traders should only consider smaller, speculative positions with strict risk management rules just as in recent weeks. Support is now found near $130, $112, and in the key long-term $95-$100 zone.

BTC/USD, 4-Hour Chart Analysis

Bitcoin topped its January swing low before the crash, but it remained shy of its December high and the key $4450 resistance despite yesterday’s clean break-out. The failed break-out pattern in the most valuable coin is a negative sign for the whole segment, and barring a quick recovery above the strong $4000-$4050 resistance zone, traders shouldn’t enter positions here.

While a move towards $4450 is still possible, with the rising weak short-term trendline still being intact, the sudden violent sell-off and the still hostile long-term technicals warrant caution here even regarding short-term speculative positions. today, and with the short-term trend still clearly being bullish, a move towards the $4450 price level seems likely. Support levels are now found near $3600 and just above $3450, while primary resistance is currently ahead near $3850.

Ripple Plunges Below $0.30 as Litecoin Tests $44 Support

XRP/USDT, 4-Hour Chart Analysis

Ripple remains very week compared to the broader market, and it fell together with its peers today despite missing out on the bulk of the counter-trend rally. The test of the $0.28 and $0.26 levels continues to be likely, and the coin is still on sell signals on both time-frames in our trend model.

The $0.30 support/resistance level is back at the center of attention, with key resistance zones now ahead near $0.32, $0.3325, $0.3550, and $0.3750, and traders and investors should stay away from the coin until we see signs of technical strength.

LTC/USD, 4-Hour Chart Analysis

Litecoin has been showing relative weakness in recent days and although it managed to hit marginal new swing highs, today the coin crashed below the strong $44 level amid the market-wide sell-off. While the coin has been leading the way higher during the counter-trend move, the long-term setup remained clearly bearish, and odds still favor the continuation of the bear market.

Primary short-term resistance is now ahead near, while the line-in-the-sand $38 level provides support below $44. The rising short-term trendline is now broken and our trend model is on sell signals on both time-frames.

EOS/USD, 4-Hour Chart Analysis

EOS turned lower after touching the target zone near $4.50, and despite the sharp sell-off, it remains above the steeply rising short-term trendline. Although the relatively strong coin found support near $3.50, traders shouldn’t enter new positions here, as today’s bearish momentum, together with the negative long-term outlook point to increased downside risks. Support levels below $3.50 are now found near $3 and $2.80, while resistance is ahead near $3.80 and $4.

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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.

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.