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Cryptocurrency Analysis: Bitcoin Undergoes 40% Correction as Altcoins Plunge Too

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The sell-off that started out in BTC as a skirmish between Bitcoin and its forked counterpart Bitcoin Cash, accelerated overnight and today, and the most valuable coin dragged the whole segment sharply lower. The decline turned into a full-fledged crash later on, with the major coins falling by an average of 30% from the recent highs, and with deeper losses in some of the largest names.

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BTC found short-term support near $15,000 yesterday, but after the coin fell below that level, waves of heavy selling pushed the coin to the primary support at $13,000 as we expected, and for now, the bottom formed near the $11,300 support.

The short-term downtrend is clearly intact, and although violent bounces are possible along the way, we still expect further downside in the market, as the long-term setup remains overbought. Below $11,300, further support levels are found at $10,000 and $9000, with stronger levels at $8200 and $7700.

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BTC/USD, 4-Hour Chart Analysis

Ethereum also entered a violent correction, as the second largest coin spiked as low as $500 before rebounding above $60. The long-term overbought readings are not yet cleared, so the correction will likely continue, although volatile counter-trend rallies are likely. Key support levels are now found at $575, between $480 and $500, and near the prior all-time high at $400, where the long-term uptrend lone is also providing support currently.

ETH/USD, 4-Hour Chart Analysis

Litecoin

LTC/USD, Daily Chart Analysis

As correlations exploded in the segment, Litecoin also turned sharply lower after its recent failed break-out attempt. The coin broke below the primary support zone between $250 and $260 and got close to hitting the $170 level too amid the mini-crash, completing a 50% pullback from its all-time high. Despite the oversold short-term picture, we expect further correction with further support levels at $125 and $100.

Dash

DASH/USD, 4-Hour Chart Analysis

Dash continues to be among the relatively strong coins, even amid the sharp sell-off, but it also fell more than 40% top-to-bottom before the rebound. The short-term overbought readings are now cleared, but the long-term picture is still stretched and more bearish price action is likely, with major support levels still at $1000, $800, $650, and $600.

Ripple

XRP/USD, 4-Hour Chart Analysis

Ripple got very close to the $1.25 target level after yesterday’s break-out, and although the broad correction dragged the coin lower and it spiked below the previous high at $0.85, the steep short-term uptrend remained intact. That said, long-term investors shouldn’t buy the coin here, while traders could still play the rising trend with smaller positions. Further support levels below $0.85 are found at $0.68, at $0.4250 and in the $0.30-$0.32 range.

Ethereum Classic

ETC/USD, 4-Hour Chart Analysis

Ethereum Classic followed the other majors lower too, after failing at the lower boundary of the previous uptrend channel, and it hit a low near $25 after violating the $32 and $30 supports. Given the extremely overbought readings on the long-term MACD we expect an even deeper correction with a likely dip below the prior all-time high at $23 before the end of this cycle.

Monero

XMR/USD, 4-Hour Chart Analysis

Monero is still trading inside the rising short-term trend channel, despite the almost 50% retracement, as the coin found strong support at $300, following a series of spikes below that level. While a durable short-term bounce is possible after the mini-crash we expect a deeper correction in the coin in the coming weeks, with further support levels found at $240, $200, $180, and $150.

NEO

NEO/USDT, 4-Hour Chart Analysis

NEO re-tested the level of its recent break-out as the broad correction in the segment dragged the coin lower as well, despite the less overbought long-term setup. We still expect a rally towards the $100 level following the correction, but traders should expect a volatile consolidation period amid the segment-wide correction. Key support zones are still found near $0.56, $0.50, and around $0.40.

IOTA

IOTA/USD, 4-Hour Chart Analysis

IOTA has been the most volatile coin during today’s sell-off, and the coin flash-crashed to the $1.1 support on several exchanges after violating the dominant rising trendline. The coin has been trading between $3 and $3.50 since the spike lower, and we expect volatile conditions to persist in the market, as a longer corrective phase is likely still ahead after the recent exponential surge. Strong support is still found at $3 and $1.5, with a Fibonacci support level between those at $2.35.

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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.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 256 rated postsTrader 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.




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3 Comments

3 Comments

  1. MinerMatt17

    December 22, 2017 at 10:39 pm

    Bitcoin found major support when it got close to 10,400 on coinbase. As soon as it got tat low, the site shut down due to so many people trying to buy.

    What makes you think 10,400 wasn’t the low? It would be almost right on par with previous 35-40% corrections.

    • Mate Cser

      December 23, 2017 at 1:59 am

      Hi Matt,

      basically, the run-up to the correction was more like Ethereum’s rally in the spring than the previous cycles in BTC from a market dynamic’s perspective, so a longer consolidation period is likely in my view, with a final low at $7500-$7700, the last major break-out point. But I will happy to buy above that if a clear bottom forms, my gut feeling is that the stops near $10,000 will be taken out before this is over.

  2. MinerMatt17

    December 23, 2017 at 4:11 am

    How do you define a clear bottom? I guess how many days of consolidation is needed? I just view these corrections that bitcoin experiences as all being the same. They get a 30-40% which is almost impossible to buy into at that exact moment, and then a quick rebound.

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Analysis

Long-Term Cryptocurrency Analysis: Correction Deepens but Leaders Remain Stable

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As the major cryptocurrencies got hit hard this week, losing around 20% on average, the long-term picture in the segment got close to an entry point for investors. The overbought readings that developed during the late-April rally are now cleared and although the short-term trends are still clearly negative, we still expect the coins to resume the recovery. With that in mind, long-term investors could start accumulating the relatively stronger coins.

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On a negative note, even the leaders violated key support levels during this week’s selloff, but the secular long-term trends are not yet in danger. The prior leaders Ethereum, EOS, and IOTA are still in the center of attention, as we expect them to form a bottom soon. Bitcoin and the other relatively weak coins, like Litecoin, Monero, Dash, and NEO are still lagging the form a technical perspective, but they are also well above the support levels that would indicate an end of the secular bull market.

BTC/USD, Daily Chart Analysis

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Bitcoin is below the key $7650-$7800 support level and it remains the biggest drag on the market, despite a brief period of relative strength this week. The upper boundary of the base pattern that we identified in April is found near $6150, with a weaker zone around $6500, and with the short-term trend clearly being negative, the latter might be tested before a bottom forms. Further resistance is ahead at $8400, $8700, and between $9000 and $9200, and traders and investors still shouldn’t enter positions here.

ETH/USD, Daily Chart Analysis

Ethereum is testing the $555-$575 support zone after violating the $625-$645 range, with the declining short-term pattern being intact. A bottom near the $500 would still keep the recovery intact, but the correction low might already be in, and investors could already add to their holdings here. Further resistance zones are ahead between $735 and $780 and near $845, while support is found near $450.

(more…)

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 256 rated postsTrader 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.




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Analysis

Pre-Market: Oil Plunges Below $70 as Markets Mixed Before Long Weekend

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Financial markets are relatively calm today, despite the hectic week that was highlighted by the Turkish currency crisis, wild swings in bonds, and a step back in US-North Korean relations. Stock markets turned lower globally, with US equities outperforming the rest of the world, essentially drifting sideways all week long, thanks to the slight correction in the Dollar’s rally, and the dip in Treasury yields that was triggered by the dovish Fed meeting minutes.

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S&P 500 Futures, 4-Hour Chart Analysis

Today, the durable goods report came out before the opening bell and although the headline number was a tad worse than expected the more important core figure beat the consensus estimate, helping the slightly dampening economic outlook, even as yields continue to fall, especially with regards to long-dated Treasuries.

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EUR/USD, 4-Hour Chart Analysis

Although emerging market currencies are way less volatile today than recently, despite the rebound in the Dollar, equities shed their early gains and are now slightly in the red. The all-important EUR/USD pair hitting yet another 6-month low near 1.1650, and the test of the key long-term 1.1450-1.15 zone looks more and more likely in the coming weeks, even as the pair is a bit oversold.

Energy Markets in Turmoil as OPEC Signals Production Increase Again

WTI Crude Oil, 4-Hour Chart Analysis

It seems that the crude oil market is in for a strategic switch yet again, as the OPEC, together with Russia made it clear today that the price of the Black Gold finally reached a desirable level. The cartel will be targeting a higher level of output later on this year in order to keep the US shale players under pressure by capping the advance in the key commodity’s market.

The WTI contract reached a 4-year high at $72 per barrel recently and the Brent contract which is more exposed to Middle East woes rose as high as $80 per barrel after trading below the $30 level just two years ago. The last phase of the advance extended above the level where a large portion of the shale plays turn profitable, and as global growth worries also surfaced, the commodity entered a selloff this week.

Gold Futures, 4-Hour Chart Analysis

Safe haven assets continue to be bid despite the relatively calm environment, and gold hit a two-week high today despite the bounce in the Greenback as buyers are back after the wash-out plunge below $1300. With the long-term setup and fundamentals still being favorable for the precious metal, the short-term downtrend line is in danger here.

As US markets will be closed on Monday, which usually favors an active session, volatility might remain high throughout the day.

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Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 256 rated postsTrader 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.




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Recommendations

Trade Recommendation: Intact Financial

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Technical Overview

  • Since double-bottoming in 2008 and 2009 at $26 (violet horizontal trendline in Figure 1), Intact Financial (IFC.TO) has enjoyed a four-fold increase. During the 2013, 2016 and 2018 corrections, the stock found support at a long-term trendline (support – green trendline; retests – green arrows).

Figure 1. IFC.TO Weekly Chart

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  • Zooming in, after topping in November’17, IFC completed a H&S pattern (tops – yellow ellipses, neckline – yellow trendline in Figure 2).
  • In January, March, April, and May, all up-moves halted at a well-defined short-term resistance (red trendline). Yesterday (May 25), the stock managed to break and close above the resistance.
  • Today, the stock closed in positive territory, whereas the Financial sector (TTFS.TO) declined by over 0.5%.
  • The $95 level had served as support on multiple occasions in 2018 (purple horizontal trendline and arrows).

Figure 2. IFC.TO Daily Chart

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Implications

  • The bounce off of the long-term support and the break above the short-term resistance are considered constructive.
  • The stock is expected to find support in the $95 – $96.50 range during pullbacks (i.e. at the red and purple trendlines).
  • The downward target from the H&S pattern was nearly met during the May decline (target – $92.25 – white vertical trendline in Figure 2, May 9 low – $92.65 – last purple arrow).

Outlook

  • Short-term bullish as long as the stock remains above $95
  • Long-term bullish as long as the stock remains above its long-term support (green trendline in Figure 1).

 Trade Recommendation

  • Buy the stock at current levels ($97.50 at EOD on May 24).
  • Target: Half at $101 (the January low which served as resistance in March – second red arrow). Other half at $108 (origin of the late 2017 decline).
  • Stop: Half upon a close below $95. Other half upon a close below the long-term support (currently at approximately $93.50).

Disclosure: No position yet but may initiate at any time. Will likely recommend the stock to my clients as a potential play within the financial sector.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.8 stars on average, based on 12 rated postsPublished author of technical research. In his work on price “gaps”, published in the 2018 International Federation of Technical Analysts’ Annual Journal, he developed a new technical tool for analyzing and trading the “gap” phenomenon – the “K-Divergence” (http://ifta.org/public/files/journal/d_ifta_journal_18). Besides obtaining a Master in Financial Technical Analysis, he has completed a BBA and an MBA from the Schulich School of Business in Toronto and has completed all exams for the CFA, CMT and CFTe designations. Currently, providing research to investment management and financial advisory firms. http://www.linkedin.com/in/konstantindimov




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