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Analysis

Trading Analysis: Bitcoin, Litecoin, Dash, Ripple, Ethereum, Stellar Lumens & Zcash

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Bitcoin

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Bitcoin continues it’s epic run toward $2100.  I note that there is an energy point on the daily chart tomorrow, and that a 5th arc is in plain sight at $2100.  Traders might want to take some profits there.

DASH

In our last update we identified the top of the square (highlighted) as likely support, and indeed it was.  Target of $96 seems reasonable at this juncture.

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Ethereum Classic

In our last update we identified the area highlighted in yellow as a likely turning point.  Note that this coin entered a long-term arc pair a couple weeks ago, moved sideways, and just exited the pair.  This is pretty bullish, IMHO.

Ethereum

In the recent past we pointed out that the 2×1 Gann angle (red) has provided pretty good support for some time now.  It has done so again. A target of $104 now seems reasonable.

Litecoin

In our last column we highlighted Litecoin as one of our favorite trades.  We tweeted that the area highlighted in yellow was a buy. At this point it seems likely that the 1st arc pair will yield in short order.  The next energy point  in a few days suggests a $40 target is reasonable.

Stellar Lumens

Stellar Lumens remains a favorite trade, despite the fact that it has been overshadowed by its XRP sibling. As you can see, it is on the cusp of exiting an arc that has been holding it back for a few days. Mind you, it has not yet closed above the arc yet! If it gets through the arc, it could go to .08-.1 from here.

Ripple

I’m sure everyone here knows that Ripple had a great week.  The fact that it has re-penetrated the arc that knocked it down is mildly bullish, though the top of square is resistance.  However, it could conceivably take a few days get through the arcs before it can mount a serious advance again.

Zcash

ZEC has been traversing a long term arc pair, sideways, for a couple weeks. An energy point is at hand, and the end of the arc pair is also close by.  When it touches the arc it will make a choice – while my guess is it will break upwards, I suggest waiting for confirmation.

Remember:  The author is a trader who is subject to all manner of error in judgment.  Do your own research, and be prepared to take full responsibility for your own trades.

Important: Never invest money you can't afford to lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here.



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8 Comments

8 Comments

  1. MSNP05

    May 19, 2017 at 3:40 pm

    Ethereum is at 112 …do you recommend holding or selling ? Your analysis have been so valuable to our family. Thank you so much.

    • Jim Fredrickson

      May 19, 2017 at 11:00 pm

      Long term it is still a great hold. Short-term traders should take profits here.

  2. Joshnj82

    May 19, 2017 at 10:21 pm

    Jim, are you still expecting LTC to surge or does the last session give reason for hesitation? I only ask b/c most majors did well while LTC was flat and left behind.

    • Jim Fredrickson

      May 19, 2017 at 11:03 pm

      Yes LTC has been mildly disappointing. I still expect it to do well in the not-distant future, but wish some of my TC holdings had been in ETH the past 2 days instead. Oh well, there will always be another trade tomorrow.

  3. Joshnj82

    May 20, 2017 at 12:16 am

    I appreciate the response Jim and hope LTC got the memo that she’s supposed to move up not down. Let’s hope she’s just a bit slower than her friends. I also wish to receive a mulligan for the day and join in on the ETH party I completely missed. Unfortunately, I used up all my mulligans on last round on the course and don’t think exchanges offer them anyway 🙁 Let’s hope this time tomorrow I’m writing a celebratory response and a salud of cold ones. Enjoy the weekend good sir.

  4. xrolo24x

    May 20, 2017 at 6:38 am

    Thank you Jim. Wondering if your team can do an analysis on the Bancor ICO. We curious about it

  5. jacobss

    May 20, 2017 at 9:23 pm

    hi Jim,
    You are fantastic and I have been investing a lot based on your analyses.
    Very, very, very favourable for me.
    Where do you get these diagrams from, can I get life updates. Now I print them out and put lines in them myself.
    I wish I had access of them any time of the day.
    Thanks for all you great analyses and please keep on doing this.
    Jack

    • Jim Fredrickson

      May 20, 2017 at 11:21 pm

      Follow me on twitter (@jimfred1276). I often tweet if i see something happening in real-time. I will be launching a new service in the near future.

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Analysis

Will Crude Oil Reach $68 a Barrel in 2018?

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Crude oil prices are likely to climb close to $68 per barrel mark in 2018. We believe that oil supply will be hit due to a few geopolitical issues if they play out as we expect. Additionally, though high crude prices will be a strong incentive for the shale oil drillers to pump more, their increase is unlikely to tilt the deficit into oversupply.

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Key observations

  1. The OPEC production cut is tilting the crude oil markets to a balance
  2. Rise in the shale oil production is unlikely to equal the increase in demand in 2018
  3. The geopolitical issues can tilt the markets into a deficit
  4. If crude oil breaks out of $55 per barrel, a move to $68 is likely

What are the current market conditions?

OPEC oil production cuts

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The November 2016 production cut by OPEC and its allies is helping the market stabilize. The US crude stockpiles have been decreasing over the past few months, which indicates that the OPEC cuts are having their desired effect, albeit slowly.

The stockpiles in the Organisation for Economic Co-operation and Development (OECD) nations is down to just under 3 billion barrels, which is roughly 171 million barrels above the 5-year average. The OPEC wants to bring the inventory levels below the 5-year average.

Reports suggest that the OPEC and its allies will extend the deal, which is set to expire in March 2018 by another 9-months. However, the oil cartel is unlikely to deepen the cuts. In the September quarter, it had produced 32.9 million barrels per day (bpd), as against 33.4 million bpd production in November 2016, prior to the production cut agreement.

In the fourth quarter of this year, the OPEC production is expected to further decline to 32.7 million bpd.

US shale oil production

The main threat to any recovery in crude oil prices is the ever-increasing production of the US shale oil drillers. US crude oil production, which averaged about 9.2 million bpd in the first quarter of this year has increased to 9.56 million bpd by the third-quarter.

The US Energy Information Administration (EIA) expects the average US crude oil production to increase to 9.9 million bpd in 2018, compared to 9.2 million bpd in 2017. That is an addition of 700,000 bpd of supply.

On the other hand, Investment bank Tudor, Pickering, Holt & Co (TPH) expects US crude oil production to reach 10.2 million barrels in 2018.

So, on an average, crude oil production by the shale oil drillers is expected to increase by 700,000 bpd to 1 million bpd.

Demand increase in 2018

The global economy is growing at a decent pace, which is expected to increase the demand for crude oil. The US EIA expects the global demand to increase by 1.6 million bpd in 2018.

Therefore, with everything else being equal, this will lead to a faster reduction in crude oil inventory and an improvement in sentiment, but not a large increase in price.

So, why do we expect crude oil prices to increase next year?

What are the events that have changed in the recent past that warrant a change in our view?

For the past two years, oil prices have not responded to geopolitical tensions because of the supply glut.

However, next year, when the markets are in a balance, any geopolitical event that can have an effect on the supply side will tilt the market to a deficit, resulting in a rally in oil prices. What are these events?

The Iran sanctions

President Donald Trump has been a critic of the deal between the US and Iran, which led to lifting of sanctions on the Islamic nation. The deal is called the Joint Comprehensive Plan of Action (JCPOA). As a result of this deal, Iran was able to resume its exports, which have skyrocketed from about 1 million bpd in 2013 to about 2.3 million bpd in September 2017.

President Trump decertified the deal on October 13 but has still not quit the deal. He wants the deal to be renegotiated, however, the remaining countries who were party to the deal and Iran are unwilling to do so.

This creates a tension between the US and Iran. Chances are that President Trump will withdraw from the deal sometime next year to fulfill his pre-election promise of ripping the deal apart.

What are the repercussions if the US quits the deal?

Presently, the EU nations are not in favor of scrapping the deal with Iran. If the US unilaterally withdraws from the deal, Iran’s exports are unlikely to have an immediate effect, until the EU decides to support it. After all, EU has been the major consumer of Iranian oil since sanctions were lifted.

However, Iran’s fields are aging. They need fresh investments to keep the oil flowing at the current rate. If the US quits the deal, it is unlikely that major oil companies, that have operations in the US will enter Iran. This can limit the capital flows to the Islamic nation’s oil sector.

As an immediate effect, the US sanctions will “put at risk a few hundred thousand barrels of Iranian exports,” Goldman Sachs wrote in a research note. However, these are only estimates and the real impact will be known only after the US withdraws from the deal. Due to the uncertainty, the markets are likely to boost prices higher, until it gets a clear picture of the effects.

Geopolitical tensions in the gulf can lead to a severe shortage of oil

The northern Iraq region – Kurdistan – is a semi-autonomous region, which recently declared Independence from Iraq. This has led to a conflict between the two. While the Iraqi forces have declared their victory in the important oil-rich region of Kirkuk, the victory is not final because the Kurdish army did not put up a fight initially to defend the oil-rich region.

However, both the Kurdish peshmerga and the Iraqi army have been trained by the US. Therefore, if the conflict is not resolved quickly, through a dialogue, it can turn bloody and lead to disruption of about 600,000 bpd of oil supply.

“Oil prices could spike a lot higher on this development because this time is different, after years of war in the region. The battle, finally, is for the oil, and no other reason. In other words, here we go,” John Kilduff, partner at energy-focused investment manager Again Capital, told CNBC.

Unless a permanent solution is reached, we expect these issues to linger on and again crop up in 2018, propping prices higher.

What does the chart forecast?

The WTI crude has been broadly trading in a range of $42 and $55. Oil has taken support close to the $42 levels four times in the past year and a half. Therefore, this is a strong support level and can be used as a stop loss for our positions.

On the upside, the zone between $50 and $55 has been a strong resistance. Oil has struggled to breakout of this zone. However, if any geopolitical event triggers a breakout above $55, a rally to $68 levels is likely, which is the minimum target objective of a breakout from the range.

How can we benefit, if crude rallies according to our expectations?

The best way to benefit from the rise in crude oil is to trade the oil futures, but due to their volatility, it is not advisable to hold it for the long-term.

The oil-based ETFs can offer an opportunity to take a position in oil. Individual energy stocks are also another means of benefitting from a rally in crude oil.

We shall soon identify the best oil-based ETF and stocks that can offer good returns in 2018.

Risk to our analysis

Our analysis is based on the assumption that the existing geopolitical issues are unlikely to be sorted out within the next year. However, a good dialogue can easily put an end to these, thereby invalidating any risk-premium to crude oil.

Also, consistent high prices above $50 can increase the US shale oil production, much higher than the currently anticipated levels. This will prevent the markets from balancing out.

Due to infighting among its members, the OPEC and its allies can opt out of the production cut deal,  which will boost supply and can lead to a crash in crude oil prices.

Featured image courtesy of Shutterstock. 

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Analysis

Daily Analysis: Stocks Shoot for the Moon as Senate Passes Budget

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Friday Market Recap

Asset Current Value Daily Change
S&P 500 2574 0.53%
DAX 12991 0.05%
WTI Crude Oil 51.60 0.25%
GOLD 1283.00 -0.49%
Bitcoin 6038 6.40%
EUR/USD 1.1776 -0.64%

Financial markets got very active today thanks to the US Senate’s decision to pass the 2018 budget, paving the way for the tax reform plan that’s been welcomed by investors in recent weeks. The Dollar, equities, and Treasury yields all got substantially higher with the Dow and the S&P 500 scoring yet another all-time high. The NASDAQ and the Russell 2000 failed to follow the former benchmarks to record highs, but the short-term rally is still definitely intact, despite the overbought readings and the overvaluation issues.

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Dow 30, Daily Chart Analysis

Forex markets were also very active as the Dollar cruised higher against all of its major counterparts, with the exception of the Great British Pound that rebounded strongly after the optimistic words of Angela Merkel regarding the Brexit process. The New Zealand Dollar continued yesterday’s negative trend, while the Canadian Dollar was also hit hard amid the early decline in the price of oil and the negative economic surprises from the country.

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Gold is down yet again, as it failed to reclaim the $1300 level amid the improved global sentiment that also weighed on the Japanese Yen as well. The Yen’s weakness helped the Nikkei to another two-decade high, as the USD/JPY pair surged to 113.50 for the first time since July.

USD/JPY, 4-Hour Chart Analysis

Cryptocurrencies

Bitcoin’s new all-time high made headlines in the segment today, as the most valuable coin surged past $6000 for the first time ever, even as the currency traded as low as $5100 just a few days ago. BTC also reached $100 billion in market cap, and the coin accounts for more than 57% of the total value of the crypto segment.

The other majors are virtually unchanged despite Bitcoin’s rise, with only IOTA losing significant ground and Ripple trading in a volatile fashion after its crazy week. Litecoin and Monero also performed relatively well, while Ethereum got stuck below the $315 line yet again, and NEO finally settled down, although it continues to trade below the crucial $30 level.

BTC/USD, 4-Hour Chart Analysis

Key Economic Releases on Friday

Time, CET Country Release Actual Expected Previous
14:30 CANADA CPI 0.2% 0.3% 0.1%
14:30 CANADA Core Retail Sales -0.7% 0.3% 0.2%
16:00 US Existing Home Sales 5.39 mill 5.32 mill 5.35 mill

Key Economic Releases on Monday

Time, CET Country Release Expected Previous
14:30 CANADA Wholesale Sales 1.1% 1.5%

Featured image from Shutterstock

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Analysis

Cryptocurrency Analysis: Bitcoin Tests $6000 as Market Settles Down

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Bitcoin is in the center of attention yet again, as the most valuable coin is knocking on the door of the $100 billion level in market capitalization. The coin touched our long-term target at $6000 on several exchanges, but it’s now trading slightly below the historic level.

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While the rest of the market is quiet, BTC is very active, and it could be in for a volatile weekend, as despite the long-term overbought readings, the short-term uptrend is clearly intact. That said, investors should avoid opening new positions here, and consider lowering their exposure further, while traders should only trade with smaller than usual sizes. Support levels are found at $5400, $5000, and near the $4650 level.

BTC/USD, 4-Hour Chart Analysis

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As the rest of the majors are still recovering from the recent correction, the total value of the segment is below its all-time high, with BTC’s dominance now standing at 57%. Most of the largest coins are little changed, with Monero and Liteocin showing considerable strength and IOTA still being the weakest of the majors. With all attention on BTC let’s see how the most traded altcoins look before the weekend.

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