Trade Recommendation – OmiseGo

MiseA cryptocurrency that doesn’t give up much ground after a strong up move is a sign that traders expect more gains after a period of brief correction/consolidation. Currently, while bitcoin hogs all the limelight, we are on the lookout to find altcoins that have held up well. One such digital currency that pops up on the radar is OmiseGo. We believe that it is setting up for a long trade. Let’s see why.

Key observations

  1. OMG has been comparatively strong compared to many other altcoins
  2. OmiseGo has formed a bullish inverse head and shoulders pattern
  3. We expect the digital currency to rally once it breaks out of $8.71

Daily chart

From a low of $0.3150 on July 16, OmiseGo rallied sharply to hit a high of $13.6860 on September 07. That is a staggering rally of 4244% within two months. Thereafter, the digital currency entered a period of correction, which found support at the 61.8% Fibonacci retracement levels of the entire rally. This shows that the traders are waiting to buy the dips, which is a bullish sign.

For most of the past two and half months, OMG has stayed above $7 levels, which is the 50% Fibonacci retracement level.

OMG broke out of the downtrend line on October 8. Though a break above the downtrend line doesn’t confirm a new uptrend, it indicates that the decline has stalled. The digital currency again retested the downtrend line on October 12 and held it. This shows that the correction in OMG is over. However, when should we buy it?

The virtual currency has formed a bullish inverse head and shoulders (H&S) pattern, which will complete on a breakout and close above the neckline of $8.71. OMG has returned from the $8.71 levels on four occasions, which makes it a significant resistance. We expect the cryptocurrency to gain momentum once it breaks out of the overhead resistance.

Therefore, we recommend a long position on a breakout and close above the $8.71 levels. The pattern target on a breakout of the inverse H&S is $11.9358. We shall keep a stop loss of $7. We don’t want to hang on to the trade if the breakout fails.

Featured image courtesy of Shutterstock. 

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Rakesh Upadhyay is a Technical Analyst and Portfolio Consultant for The Summit Group. He has more than a decade of experience as a private trader. His philosophy is to use technical analysis for momentum trading and fundamental analysis for long-term positions. Rakesh likes to keep himself fit by lifting weights and considers himself to be a spiritual person.