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Daily Analysis: Markets Rebound after Crazy Thursday as Cryptocurrencies Hold Gains

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Friday Market Recap

Asset Current Value Daily Change
S&P 500 2433 0.07%
DAX 12732 0.33%
WTI Crude Oil 44.80 0.72%
GOLD 1258.00 0.25%
Bitcoin 2450 5.83%
EUR/USD 1.1202 0.07%

Stock markets are slightly higher globally today, as the US Dollar is correcting its strong post-Fed move in quiet trading. The Bank of Japan was in focus today, as it left its monetary policy and outlook unchanged despite the rate hike by the US central bank. The Yen continued lower after the decision, helping Asian markets in early trading, although the Chinese index was a tad lower once again. European and US stocks are fractionally higher, with the NASDAQ still in a weak position following the flash-decline in the tech giants exactly one week ago.

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USD/JPY, 4-Hour Chart Analysis

Commodities are also trading higher, led by the rebound in the battered crude oil, while gold is also trying to rally after its post fed correction while industrial metals are little changed, with the Chinese weakness weighing on the segment. European currencies are broadly higher as the Eurozone inflation reading was in line with expectations after a series of misses. That said, the Euro is still well below its recent highs against the Dollar, and the Pound is also shy of the 1.30 level it reached before the snap election.

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Cryptocurrencies

Ethereum led the way higher yesterday, but today the rebound stalled in the crypto market, as the majors are still stuck in a short-term downtrend. Today’s session could be crucial in deciding whether or not the coins will test their lows of yesterday or turn higher after the sharp correction.  Ethereum, Litecoin, Dash, Zcash, Bitshares, and Stratis are in more promising technical positions, while Bitcoin, Monero, Ripple, and ETC are among the weaker looking coins.

Bitcoin, 4-Hour Chart Analysis

Technical Picture

The seemingly never-ending trend in the German DAX index looks to be faltering, with a rather strong momentum divergence forming on the 4-hour chart and a broadening short-term top formation also being formed on the same time-frame. The 12,650 level is in focus right now, while the recent all-time high near 12,900 is providing primary resistance. The rising long-term trendline is found just above 12,600, while further support levels at 12,500 and 12,375 could serve as targets for a move lower.

DAX Index, 4-Hour Chart Analysis

Key Economic Releases on Friday

Time, CET Country Release Actual Expected Previous
Tent. JAPAN Monetary Statement
11:00 EUROZONE Final CPI 1.4% 1.4% 1.4%
14:30 US Building Permits 1.17 mill 1.25 mill 1.23 mill
14:30 US Housing Starts 1.09 mill 1.23 mill 1.17 mill
16:00 US Prelim Consumer Sentiment 97.2 97.1

Key Economic Releases on Monday

Time, CET Country Release Expected Previous
1:00 JAPAN Trade Balance 0.1 trill
1:00 UK Rightmove HPI 1.2%

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Analysis

Long-Term Cryptocurrency Analysis: Bitcoin and Ethereum Break-Out of Declining Trends

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The altcoin-led rally continued since our previous look at the long-term charts, and the major coins all confirmed a new short-term uptrend. Most of the largest digital currencies also broke out from their broad declining trends, as the total value of the segment is now more than 50% above the level around the correction low.

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BTC/USD, Daily Chart Analysis

The overall picture remained positive, with only Bitcoin’s weakness causing headaches for crypto bulls, as the most valuable coin is hovering close to declining trendline that dominated trading throughout the first quarter of the year.

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Despite the short-term weakness, BTC is still among the stronger majors from a long-term perspective, and with the secular uptrend clearly being intact, long-term investors should hold on to their coins and add to their holdings on the short-term pullbacks.

Crucial resistance is still just ahead between $9000-$9200, with further levels at $10,000 and $11,300, while support is found near $8400, $7650, and in the $6150-$6250 zone.

ETH/USD, Daily Chart Analysis

Ethereum built upon its recent relative strength, and the coin broke out convincingly above the declining trendline, and reached the next key resistance zone between $625 and $640 before the momentum of the move stalled.

While there are still several strong zones ahead, with the closest ones near $725 and $845, barring a quick move back below the declining trendline, the coin should continue the advance. With the long-term MACD still just in neutral territory, long-term investors could add to their holdings during short-term corrections, with key support levels at $500, $450, and $400.

(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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4.5 stars on average, based on 229 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: Micron Technology

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Technical Overview

  • Micron Technology has experienced a 6.5-fold increase since May 2016. During this 2-year period, the stock found support at its intermediate-term trendline on numerous occasions (green trendline and arrows in Figure 1).
  • From the last retest of the intermediate-term support (last green arrow), the stock moved sharply higher, carried by a steeper support (violet trendline). The same trendline served as a resistance for two weeks in March 2018, when it was retested from below (last two violet arrows).
  • Today (April 23), the stock is breaking below its short-term support (orange trendline), after failing to remain above its 50 SMA on Friday (not shown).

Figure 1. MU Daily Chart

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Implications

  • By the time its correction is over, the stock is expected to have retested the intermediate-term support (green trendline). If the decline is severe and swift, the stock may bounce off the $40 level (i.e. target is the higher of $40 and the green trendline).
  • The stock’s 2018 Resistance (the trendline connecting the March 21 and April 18 highs) is expected to serve as a resistance (red trendline).

Outlook

  • Bearish as long as the stock is trading below its 2018 Resistance.
  • Neutral if the stock moves above the 2018 Resistance.

Trade Recommendation

  • Short at current levels ($48.75 – $49.25)
  • Target: Higher of $40 and green trendline
  • Stop: A close above the red trendline (currently at approximately $53.35, falling by roughly 40 cents/day).

 Benefits of Recommended Trade

  • A favourable risk-reward profile (roughly 1 : 2.25).
  • A sloping-down resistance used as a stop, resulting in an improving risk-reward profile of the trade as time goes by. The steep negative slope of the 2018 Resistance may potentially lead to a situation where the trade is “unsuccessful” (i.e. the stop is hit first before the target), however, still profitable. This is so as the 2018 Resistance will already be below current prices by mid-May (i.e. may get stopped out at a lower price than when the short was initiated).

Disclosure: No position

Featured image courtesy of Shutterstock.

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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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Analysis

Bitcoin Cash: Suddenly A Star Performer

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Just look at what has been happening in the prices of bitcoin and bitcoin cash.  Between December, the king of crypto fell some 65%. Since the April 1 low, bitcoin has partially recovered, gaining 31%.  Bitcoin cash really took it on the chin losing 80% in the December-April period. However, since then, BCH has been a digital darling, gaining 80%.  This ranks among the top crypto performers so far in the month of April. What’s behind the move?

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What We Have Been Missing

I have a confession to make.  For the past year bitcoin cash has pretty much flown under my radar. Here is a best efforts excuse.  Bitcoin cash has only been in existence since last August. During this time there have been so many ICOs flying around that keeping up with something which sounded like just another name for the original king of crypto didn’t seem all that important.

That was a mistake because there is quite a difference between the original and bitcoin cash.  And if it continues, someday bitcoin cash will be king. Here is what I am getting at.

All cryptocurrencies face certain limits when it comes to scaling. It is a more complex issue than simply adding more transactions to the blockchain.  A whole lot of the Gen III companies are attempting to come up with a solution to minimize the time required to confirm a block of transactions without blowing up fees.

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Bitcoin has the distinction of suffering the worst of both slow speed and bloated fees.  Back at the price peak last December transactions were limited to fewer than 10 per second while fees shot up to more than $30.  

Anyone buying bitcoin during that period for investment purposes probably didn’t care. After all, by last December, bitcoin had appreciated over 7,000%.  But if you wanted to use Bitcoin to buy a $4.50 Latte or a $75 Cuisinart coffee maker from Overstock.com, logic told you to forget about it.

Small Transaction R Us

This is where bitcoin cash came into being.  BCH became a hard fork of bitcoin, meaning that it uses the bitcoin protocols except for one important difference.  Each BCH block initially contained 8 megabits compared with just one for BTC. The whole point of BCH is to create a currency that in a medium of exchange rather than simply an investment device.

Back around August, the average transaction fee for BTC was about $0.70 (BCH was $0.08) so fees were completely overshadowed by the fixation in bitcoin’s skyrocketing price.

The Lessons From December

Long before the explosion in bitcoin fees last December work was underway on the Lightning Network.  When fully implemented by the Bitcoin community, it will reduce the gap between itself and bitcoin cash.  But that could be completely illusory based on last weeks announcement.

Around May 15 bitcoin cash plans to create a hard fork that will increase block size four fold to 32 bits.  Word of this has to be one big reason for the bitcoin cash price outperforming many of its peers. At least for the time being, BCH will have a considerable advantage both in terms of confirmation speed and fees.  

According to Bitinfocharts, current bitcoin fees are 0.199 compared with 0.0035 for bitcoin cash, while mining profits are about equal. This is a data point that is most impressive because the BCH maximize block size has yet to be increased.  BCH is attracting smaller average transaction size. In other words, their plan is working.

The Unpaved Road

The rapid price appreciation and the hard fork announcement will draw attention to BCH.  This is enough to make it more attractive than BTC. One thing to remember. If bitcoin cash developers intend to become a medium of exchange, a currency for the masses, they have a long way to go.  

All digital currencies face the same challenge.  Bitcoin claims acceptance by more than 10,000 merchants including 14 large retailers like Overstocked and Microsoft.  Bitcoin cash lays claim to just 429. Either way, fewer than 5% of all retailers accept cryptocurrencies and we suspect that less the 2% of all retail transactions are represented by any of these currencies.

Even so, bitcoin cash is suddenly taking on a far more exciting role in the crypto game so don’t be surprised to see this continue for a while.

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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4.3 stars on average, based on 61 rated postsJames Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.




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