Technical Analysis and Market Entry: XRP/USD’s False Breakout Tricked Buyers

  • XRP/USD remains within the control of the market bears after the recent surge in upside momentum proved to be unsustainable.
  • A false breakout was seen as the price escaped a pennant structure, which was very much short-lived.

XRP/USD: Recent Price Behavior

XRP price action has remained tilted to the downside, failing to regather upside momentum that was seen early last month. XRP/USD was showing promising signs with its steady and consistent gains. The buying pressure kicked into full speed in early-mid May, surging some 70% before moving into consolidation mode.

A bullish pennant structure was starting to form following this aggressive move higher. The promise of a breakout began to materialize in the week commencing 10th June, which further ran into the following week with a consecutive advance. The 17th June week saw the bulls extending to the upside and closing above the pennant structure. Technically, this would attract some further buyers, given the consolidation and pattern breakout.

XRP/USD daily chart.

False Breakout

The above-described behavior, however, appeared to be a classic false breakout. Market bears quickly piled in with a significant weekly engulfing candle to the downside. The noted two week run of gains were reversed with a large drop south. XRP did manage to gather some support at the lower acting trend line of the pennant, with buyers trying to protect the psychological $0.4000 mark.

XRP/USD price action has fallen back down within the pennant structure, which in theory has another opportunity to still break out to the upside. However, given the size and move of the bearish engulfing weekly candle mentioned, it does raise the probability for further downside for now.

XRP/USD weekly chart.

Key Near-Term Technical Levels

The lower acting trend line of the technical pattern discussed tracks around $0.3900. Should this fail to provide needed support, a strong demand zone is seen just below. The area runs from $0.3900 down to $0.3600, which has acted as both support and resistance in 2018 and 2019. Immediate resistance is seen just ahead at $0.4250, the upper part of the noted pennant.

Trade Recommendation

As the price narrows back within the pennant structure, a convincing sustained breakout will be eyed. A buy will be attractive upon a daily breakout and closure above the pennant; however, a retest will also need to hold. Previously with the most recent break north, the retest failed as the price fell straight back through support.

An entry around $0.4250 -$0.4300 would be of interest, with upside targets being $0.4800, $0.5000 and then $0.5500. Upon successful breakout and retest, stops to be placed just below the structure at $0.3800.

Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock. Chart via CoinMarketCap. 

Ken has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.