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Cryptocurrency Analysis: Market Stabilizes but Bounce Fizzles Out

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The test of the crash lows in the segment got postponed by the early-session rally today, in the case of most of the majors, as yesterday’s sell-off ran out of steam. That said, the bounce that followed the overnight low didn’t change the short-term setup in the coins, as the dominant downtrend is still intact and the main resistance levels haven’t been violated.

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Bitcoin is among the relatively weaker coins, while still leading the moves in most of the coins, as correlations remain elevated. The coin has been hovering around the $10,000 level throughout the day but the weak bounce topped out far off the $11,300 level that serves as primary resistance here.

The short-term setup is still bearish and we expect at least a test of the crash low, and a possible dip to $8200 and $7650 before the end of the current cycle, but investors could still add to their long-term holdings near the main support levels, as the long-term setup is getting oversold.

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BTC/USD, 4-Hour Chart Analysis

Ripple has been one of the leaders of the decline and the coin is still trading under heavy selling pressure after getting close to the $1 level overnight. XRP is expected to dip below that support zone, with a possible test of the $0.85 level as well, although the long-term investors could still add to their positions near those levels. Trades should wait for a trend change as volatility will likely remain elevated.

XRP/USDT, 4-Hour Chart Analysis

Ethereum

ETH/USD, 4-Hour Chart Analysis

Ethereum is showing relative strength yet again, although it remains below the prior rising short-term trendline, while being well clear of the $1000 level, for now. As the long-term setup is overbought, we still expect the coin to continue the correction, with a likely dip below the crash low, and traders and investors should wait before entering new positions. Support levels below $1000 are still found at $850 between $740- and $750 zone, and at $625, and $575.

Litecoin

LTC/USD, Daily Chart Analysis

Litecoin remains relatively weak compared to the rest of the market, holding just above the overnight lows and being close to the crash low as well. Strong resistance is ahead between the $170 and $180 levels, and at $200, while support levels below $140 are found at $125 and $100, and ee still expect a move below the correction low before the end of the cycle.

Dash

DASH/USD, 4-Hour Chart Analysis

Dash is also among the weaker coins and the currency only experienced a meager bounce off the $650 level today. As Litecoin, Dash is expected to drop below the crash lows soon, with a likely test of the support zone near $500 that is converging with the rising long-term trend now, while strong resistance is ahead near the $825 level.

Ethereum Classic

ETC/USD, 4-Hour Chart Analysis

Ethereum Classic is under selling pressure in line with the rest of the segment, and the coin is also in a declining trend, although the long-term setup is improving, and the crash lows are relatively far from the current price level. Despite that, we expect the coin to test the $23 level before the end of the cycle, with another support level near $25 above that. Investors could already add to their positions around those zones, while traders should wait for a trend change before entering new trades.

Monero

XMR/USD, 4-Hour Chart Analysis

Monero is slightly above the overnight lows, as the coin remains relatively weak compared to the rest of the majors, trading in a clear downtrend. The currency faces strong resistance just above the current price level, and near $300, while the crash low at $240 is the primary support level. We expect the correction to carry the con below the prior low, with a likely test of the $200 level before the end of the cycle.

NEO

NEO/USDT, 4-Hour Chart Analysis

NEO is holding up well amid the broad sell-off in the segment, and as the long-term setup in the coin remains, overbought we expect further corrective price action in the coming weeks. Strong resistance is ahead just above the $150 level, while support is found near $125 and at $100. A drop below $100 is likely before the end of the correction, so traders and investors should wait for better entry points, with further support levels at $80, $64, and $56.

IOTA

IOTA/USD, 4-Hour Chart Analysis

IOTA is hovering around the short-term support level near $2.20 today, as the coin is back among the relatively weaker coins after a brief period of strength. While we expect a durable bottom in IOTA soon, a volatile swing lower is likely with a dip below the crash low just under $2, and a possible test of $1.5. With that in mind, traders should still stay away from entering new positions, while investors could add to their holdings near the main support zones.

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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 257 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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  1. mvppvm_07

    February 1, 2018 at 1:12 am

    I keep learning from the TA. Usually more interested in the downward trending over the upward possibilities. This update is the 3rd (?) in the “watch out below” analysis of the majors in the market. Other than the TA which offers indicators of behavior / history, does anyone here have a sense of the reasons we’re seeing this behavior at this point in time?

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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 257 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 257 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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