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Technical Analysis: Consolidation Continues as Weekend Rally Fails but Support Levels Hold

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The choppy, hard-to-trade period that we expected after the crash two weeks ago is still ongoing, as most of the major coins are trading sideways inside the range of the initial rally off the January 17th low. That said, the broader declining trend in the segment is clearly intact, and the continuation of the correction is still the most likely outcome, even as the long-term charts are looking more and more constructive.

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Bitcoin started the day in a clearly negative fashion, while altcoins also got sold across the board, and the most valuable coin breached the $crucial $11,300 level in the process. Although the decline stopped, later on, the coin is trading near its intraday lows, and the weak rising trendline of the bounce is also close to the current price levels.

We still expect a move towards the crash lows with a possible dip below $9000 before the end of the cycle, but investors could still add to their long-term holdings near the main support zones. Above $11,300 strong resistance is found at $13,000 while support below $9000 is at $8200 and $7650.

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BTC/USD, 4-Hour Chart Analysis

As correlations are still elevated in the sector, most of the altcoins are also in the red today, but Ethereum is holding up above the $1175 level, being the strongest major from a short-term perspective together with NEO.

Primary support is found at $1000, and with the long-term picture still being overbought, we expect a move below that and the prior correction lows in the coming weeks, so traders and investors should wait for better opportunities before entering ETH’s market. Below the $740-$750 zone, further support levels and found at $625, and $575.

ETH/USD, 4-Hour Chart Analysis

Litecoin

LTC/USD, Daily Chart Analysis

Litecoin is still among the relatively weaker majors, and the coin is now back near the key zone between the $170 and $180 levels after staying below the strong $200 resistance during the weekend rally. The coin is stuck in a dominant downtrend, while momentum is now neutral on both the 4-hour and daily time-frames, but we still expect a drop below the crash lows with a possible test of the $125 and $100 levels.

Dash

DASH/USD, 4-Hour Chart Analysis

Dash is showing weakness again, as the coin remained below the key support zone around the $8225 price level, despite the broad rally in the segment during the weekend, while it joined the decline today in early trading. As the declining short-term trend in the coin is still clearly intact, we expect the correction to continue with at least a test of the prior lows, with further strong support found at $500.

Ripple

XRP/USD, 4-Hour Chart Analysis

Ripple drifted out from the steep declining trend but the rally attempt failed in the coin yesterday, and the coin is now back near the $1.25 support, despite the brief spike higher. We still expect a dip towards the $1 level soon, with a possible test of the crash low near $0.85 before the end of the current cycle. Strong resistance is ahead at $1.50, while further support is at $0.68, with a short-term zone just above $1.10.

Ethereum Classic

ETC/USD, 4-Hour Chart Analysis

Ethereum Classic has been relatively strong throughout the weekend but the rally in the coin stalled near the declining trendline, and today’s sell-off carried it back to the vicinity of the key $30 level. The currency is now neutral form a long-term perspective, and although we expect the correction to continue, investors could add to their long-term holdings near the $25 and $23 levels on the short-term sell-offs.

Monero

XMR/USD, 4-Hour Chart Analysis

Monero could reach over the $330 level, as it continued to show relative weakness compared to the other majors, but it remains above $300 today. The technical setup is negative from both short- and long-term perspectives, and a drop to $240 and possibly $200 is still likely.

NEO

NEO/USDT, 4-Hour Chart Analysis

NEO has clearly been the leader of the weekend rally, although the coin remained below the prior rising trend channel. The long-term picture is still overbought, and the coin will likely continue its correction soon, and a dip below $100 is expected before the end of the cycle. Further support levels are still found at $80, $64, and $56, while the coin is trading right in a strong resistance zone now.

IOTA

IOTA/USD, 4-Hour Chart Analysis

IOTA is finally showing some relative strength today after being under heavy selling pressure for almost a week. The long-term momentum is headed towards oversold readings, and although we still expect a move below the crash lows, a durable bottom might be close in time. Strong support levels are found at $2.35, just below $2, and at $1.5, and long-term investors could still add to their holdings near those zones.

Featured image from Shutterstock

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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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.

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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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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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