NEM Update: Good Time to Buy the Dip

What would you think if we told you that NEM (XEM/BTC) is a crypto leader in terms of chart analysis? Many would think that this statement is preposterous. After all, the market is still down by 85% from the 2018 peak of 0.000137. In September, it was even down further by over 90% when it dropped to 0.00001257. Saying that it is a crypto frontrunner may sound absurd.

In reality, however, it is.

NEM reversed its trend before any other large-cap altcoin. On top of that, it provides us a roadmap as to how large-cap cryptos can jump-start their bull cycle. In this article, we reveal why it is a good time to buy the dip.

Accumulation at the Parabolic Support

Market cycles often end where they began. In the case of NEM, the bear market ended when it dropped to the parabolic support area. If you look at the weekly chart, the range between 0.000014 and 0.000016 was the market’s resistance back in March 2017. When the market took out the resistance, it blasted off to 0.00013980 in May 2017.

In addition, this level provided much-needed support back in December 2017. NEM wicked down to this parabolic support area and briefly breached it. When the market recovered the support, NEM skyrocketed.

Weekly chart of NEM

This price action tells us that the range between 0.000014 and 0.000016 is important for market makers. They have defended that area in the last two market cycles. It appears they are doing the same now.

A look at the weekly chart shows that NEM traded within that range from August to November 2018. NEM has never moved within a relatively narrow range since March 2017. This tells us that the smart money used the parabolic support to accumulate positions. With a new base established, the market should soon be ready to launch the markup stage of the new cycle.

Launch of the Initial Pump

A big bullish breakout is the most reliable signal that the accumulation phase is over. In the cycle of market emotions, this is the stage where participants view the pump as a sucker’s rally. Having spent almost all year in the bear market and watching NEM get devalued by more than 90%, people have been conditioned to be pessimistic. Many won’t buy the breakout because they believe that the market will eventually resume its slump.

NEM’s initial pump just proved this point.

On November 12, the market printed volume that’s over 1,214% of its daily average. That’s an astronomical volume surge! This triggered the breakout from an inverse head and shoulders pattern on the daily chart.

Daily chart of NEM

One can only assume that the smart money is behind this move because there’s no way retail traders would instigate such a breakout. On top of that, observe how volume significantly declined after the pump. This is another signal that retail investors are yet to get a piece of the action. For them, this is nothing but a sucker’s rally.

However, a closer look at the market reveals that the rally to 0.00002249 on December 10 created NEM’s first higher high this year. This is a technical signal indicating that the market has turned slightly bullish. We know it’s hard to believe but the next section should help clear your bearish bias.

Anticipate the Higher Low

Basically, a market is considered bullish when it generates a higher high and a higher low. So far, NEM has given us a higher high. Technically, the low of 0.00001385 on October 29 is also a higher low as it acted as the right shoulder. Nevertheless, a higher low that’s above the accumulation range should be very convincing.

Fibonacci levels of the current range

If the market creates a higher low near the breakout, then NEM has sufficiently met the basic definition of a bullish market. This will be a good time to buy the dip.

Bottom Line

NEM acting as an altcoin leader may sound far fetched. However, the accumulation at the parabolic support and the technical reversal show that NEM is ahead of its peers. Also, its bullishness can be further solidified once it manages to print another higher low. That would be the point at which to buy the dip.

 

Featured image courtesy of Shutterstock.

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, InvestorAcademy.org 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.