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The Week in Review: Cryptocurrencies Shine as Global Stocks Rise

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Weekly Recap

Asset Current Value Weekly Change
S&P 500 2363 0.80%
DAX 12312 2.06%
WTI Crude Oil 50.81 5.92%
GOLD 1247.50 -0.24%
Bitcoin 1072 1.19%
EUR/USD 1.0657 -1.49%

The correction that took hold of global stock markets last week didn’t last too long and the leaders of the rally, namely the Nasdaq and the DAX, were once again flirting with all-time highs this week. The US healthcare bill debate was put on the sideline, as the media’s attention switched to the Brexit process that officially started on Tuesday with the triggering of Article 50 by the British Government. The Pound experienced some volatility thanks to the announcement, but the currency finished the week on a positive note, even as the FTSE 100 underperformed most of its peers.

Weekly progress of the main global indices, Comparison Chart (% gains)

The end of the first quarter brought active trading in the second half of the week, as per usual, but volatility remained muted following the most volatile period in a while. Oil bounced back strongly after the key technical breakdown of the previous week, and the WTI contract finished above the crucial $50 per barrel on Friday. Gold hovered around the $1250 level all week long, successfully ignoring the rally in the Dollar, as it remains encouragingly strong despite the rate hike cycle of the Federal Reserve. The Euro lost ground against all of its major counterparts, while the Yen and the Franc remained stable throughout the week.

Cryptocurrencies had a great week, with several up-and-coming altcoins gaining significant ground during the period. Ripple and Litecoin were the most notable winners of the week, but Ethereum and Monero also held on to their recent gains. Bitcoin traded sideways, but it remained above the crucial $1000 level, while Dash was the only clear loser of the week.

Economic numbers continued to provide support for the global bull market, with only a few negative surprises throughout the week. In fact, there were several blowout numbers, such as the German retail sales reading, the US consumer confidence index (a new 16-year high!!), and US pending home sales. The only worrying sign is the rise in US initial jobless claim, but even if it’s a quite reliable early indicator, the 258,000 number is still far from being scary.

Technical Corner

The recent correction in global stocks was led by the US financial sector, as the largest US banks suffered double-digit losses following the Fed-meeting. Investors evaluated the central bank’s statement as a sign of a less aggressive rate hike schedule. That pushed bank’s lower, as the hikes are generally considered bullish for them in the current environment. That said, the sell-off was very much in the cards already, as technicals screamed for a correction.

The US financial sector (XLF), Daily Chart

The sector was well in overbought territory following the strong post-election advance, and the ETF that represents the segment also showed a significant momentum divergence before the decline. The extent of the previous rally is well described by the fact that a 12% correction only carried XLF to around the middle of the rising trend channel (this is a multi-trillion dollar industry, mind you).

This week’s bounce took the sector back to a previously important resistance level at $23.75, after precisely reaching the 23.6% Fibonacci retracement level at $23.07. The MACD indicator is now in neutral territory, but further sideways price action, or another sell-off, is still likely before a sustainable rally can develop. It will be interesting to see how the segment performs, as it should be a good tell for the direction of the whole US market in the coming weeks.

Key Economic Releases of the Week

Day Country Release Actual Expected Previous
Monday EUROZONE German Ifo Business Climate 112.3 111.2 111
Tuesday US CB Consumer Confidence 125.6 113.9 114.8
Wednesday US Pending Home Sales (monthly) 5.50% 2.30% -2.80%
Wednesday US Crude Oil Inventories 0.9 million 1.2 million 5.0 million
Thursday GERMANY Prelim CPI 0.20% 0.40% 0.60%
Thursday US Final GDP 2.10% 2.00% 1.90%
Thursday US Initial Jobless Claims (weekly) 258,000 244,000 261,000
Friday GERMANY Retail Sales 1.80% 0.70% -0.80%
Friday UK Current Account -12.1 billion -16.3 bil -25.5 bil
Friday UK Final GDP (quarterly) 0.70% 0.70% 0.70%
Friday CANADA GDP (monthly) 0.60% 0.30% 0.30%
Friday US Chicago PMI 57.6 57.2 57.4

 

The Story of the Week: Apple Hits New High Again And Tops $750 Billion

Apple, Weekly Chart Analysis

The most valuable company in the world keeps on delivering respectable returns to its shareholders, despite its already enormous size. As an example of just what $750 billion dollars mean, a country with such a GDP would be in the top 20 largest economies globally. With that in mind, the fact that the value of the company went down by more than 30% in the past years alone is mind-boggling.

The obvious question is that did the value of the company really change that much in that short period of time? Well, the correct answer is that probably not. The emotional rollercoaster of the stock market led to these fluctuations, together with the change in global investor sentiment, while also being heavily influenced by the amount of “free” money supplied by the central banks.

So, will this be another triple digit rally, or is the stock about to turn lower? The answer is tricky, since we are after an 8-year bull market that helped Apple immensely, and a new bear market could wipe out a large chunk of its recent gains (yes, even such a strong brand is vulnerable). What’s sure is that the trend is still clearly bullish, and the company also keeps on paying dividends. That said, taking some chips off the table when the stock is getting overbought, like right now, is not a bad idea, as a good entry point is always ahead.

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 352 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

Stocks Pull Back as China Exits Trade Talks

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Global stock markets have spent the better part of the day in the red, although the losses are muted, and markets are slightly choppy before Wednesday’s Fed meeting. China pulled out of the scheduled trade talks with the US following last week’s tariff-escalation and that put pressure on risk assets globally. Chinese and Japanese markets were closed today, and that also attributed to the lower than usual liquidity and trading activity.

Dow 30 Index Futures, 4-Hour Chart Analysis

European Central bank President Mario Draghi warned of a “vigorous” pick-up in inflation, which triggered a selloff in the dollar and bonds across the globe, while putting more pressure on risk assets too. The dollar almost regained all of its losses since Draghi’s speech and with the looming fed decision in mind, further choppy and nervous trading is expected in the Greenback, especially following the recent surge in Treasury yields.

Russell 2000, 4-Hour Chart Analysis

The Dow and the S&P 500 both continued to retreat off last week’s record highs, as Friday’s trend resumed, and despite the bounce in the market leading tech giants, the Nasdaq is also lower. On a negative note, small-caps are trading at a 1-month low, as measured by the Russell 2000, which could mean that the US market might be ready to roll over into a correction.

The main European indices are holding on to most of last week’s gains in the meantime, but only the energy segment is clearly positive today, with the help of the strong rally in the price of crude oil.

Dollar and Euro in Focus Before the FED

EUR/USD, 4-Hour Chart Analysis

The EUR/USD pair will see fireworks for sure this week, and although the pair reached the 1.18 level today, it’s still in a zone with strong resistance and bulls still can’t conclude a successful breakout, with the 1.1675 level still being close form a technical perspective. For now, the short-term uptrend is intact, but a quick move below 1.1750 could mark a reversal.

Emerging market currencies are mixed, with the Turkish Lira trading notably higher thanks to the possible release of Pastor Brunson, who has been a major catalyst for the diplomatic troubles between the US and Turkey. The release of the Pastor could stabilize the currency, but another major global risk-off shift could hurt the vulnerable country again, as yields continue to rise globally.

WTI Crude Oil Futures, 4-Hour Chart Analysis

As Saudi Arabia basically ignored Trump’s call for lower oil prices, the recent strength in the commodity culminated in a break-out to new 10 week highs in the WTI contract, which topped the $72 per barrel level for the first time since early July. Natural gas hit $3, and it is on the verge of breaking out to a new 7-month high too, as the whole energy segment is rallying.

Elsewhere in the commodity segment, the Dollar’s choppy price action led to a mixed picture, with copper pulling back slightly from last week’s highs, while gold is still fighting to stay above the $1200 per ounce level as it has been the case for several weeks now.

Featured image from 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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4.6 stars on average, based on 352 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

Crypto Update: Bullish Continuation Patterns for Lisk and Waves

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Last month, we ran a series of articles about altcoins that broke out from patterns that have kept them bearish for most of the year. A few days after the breakouts, rallies faded. It caused many to feel that the breakouts were bull traps. Many of the altcoins we covered showed signs of weakness. Some even went below the price level.

In technical analysis, breakout rallies always fade. Many assets tend to revisit the breakout price level or even breach it. What you need to look for to remain confident in your investments are continuation patterns. These structures would tell you that the pullback is temporary and the uptrend is still intact.

In this article, we look at continuation patterns for Lisk and Waves.

Lisk/Bitcoin Analysis  

The Lisk/Bitcoin pair (LSK/BTC) broke out of a large falling wedge on the daily chart on August 15, 2018. This happened after bulls breached resistance of 0.00046. Because of the breakout, the pair managed to rally to as high as 0.00088636 on August 29. At that level, bottom pickers and breakout traders started to take profits. Consequently, the market pulled back.

Daily chart of LSK/BTC

Now, LSK/BTC dropped to as low as 0.000422 on September 20. As a result, many stop losses were triggered. You can infer this because of the significant rise in volume. However, those who cut their losses were badly whipsawed. The pair closed the day at 0.00051683, which is still a level above the breakout.

Seasoned traders would have instead bought the dip instead of cutting losses. That’s because LSK/BTC is forming a bullish flag on the daily chart. This is a pattern that conveys consolidation in preparation for the next move up. In other words, the market remains bullish. It just needs to establish a new base to keep its ascent sustainable.

Waves/Bitcoin Analysis

The Waves/Bitcoin pair (WAVES/BTC) took out resistance of 0.000286 on August 12, 2018. The price action triggered the breakout from the large falling wedge on the daily and weekly charts. The breakout inspired a rally to 0.000367 on August 13. At this price, the breakout rally faded as many took profits.

As heavy selling commenced, Waves/Bitcoin slid to as low as 0.00029 on September 7. This drop would have made many investors nervous. Fortunately, bulls held their ground. That’s because the market was creating a bullish pennant on the four-hour chart.

WAVES/BTC four-hour chart

After the breakout rally faded, Waves/Bitcoin range traded between 0.000367 and 0.00029. As you can see on the chart, bulls defended 0.00029 multiple times. This was a very encouraging signal. It tells us that participants are buying as close to the breakout as possible. Once the market finally realized this, WAVES/BTC exploded.

Now, WAVES/BTC appears to be in the midst of creating another bullish continuation pattern. It is very likely to explode again soon.

Bottom Line

In technical analysis, breakouts rallies fade more often than not. Many assets tend to revisit the breakout while others go below it. If you want to remain confident in your investments, look for continuation patterns. These structures tell us that the altcoin is consolidating in preparation for the next move up.

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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3.6 stars on average, based on 237 rated postsKiril is a financial professional with 4+ 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 ETFs, as he does his own crypto research and is the subject matter expert at ETFdb.com. 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.




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Analysis

Crypto Update: Market Stabilizes as Ripple Craze Fades

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The major cryptocurrencies had crazy Friday, with the skyrocketing Ripple in the center of attention. XRP more than doubled in 24 hours, and the coin was up 3 times off its low from earlier this month before entering a correction in the second half of the day. Ripple briefly took over Ethereum as the second largest coin by market capitalization, even as ETH also hit an almost three-week high amid the broad rally in the segment.

XRP/USDT, 4-Hour Chart Analysis

XRP settled down above the $0.50 level near the market cap of ETH, but short-term the coin is severely overbought, and a pullback to the $0.42-$0.46 zone is still very likely even if the coin manages to hold on to its stellar gains and enter long-term rising trend. For now, a long-term trend change is not confirmed, despite the huge bullish move, with most of the segment still being in bearish long-term trends.

That said, the short-term buy signal is still intact in our trend model, and should the overbought readings get cleared, traders could enter new positions again. Support levels are found near $0.54, $0.51, while resistance is ahead near $0.57, $0.64, and $0.75.

BTC/USD, 4-Hour Chart Analysis

Bitcoin got up to $6750 yesterday, but so far, it failed to overcome the resistance zone near that price level, and the coin is now trading in a shallow short-term correction. BTC needs to stay above the $6500 support to maintain the break-out that followed Ripple’s surge and to remain on a buy signal in our trend model.

The fact that correlations are still declining between the coins is a positive sign, but the overall bearish picture in the segment and Bitcoin’s proximity to the key long-term zone still warrant caution here. Further resistance zones are now ahead near $7000 and between $7200 and $7300, while support below $6500 is still found at $6275, $6000, and near $5850.

Altcoins Pull Back with Ripple, Short-Term Setup Still Promising

ETH/USD, 4-Hour Chart Analysis

Ethereum finally broke above the key $235 support/resistance level thanks to yesterday’s broad rally, and the coin reached the next major resistance zone near $260 as expected after the bullish move. Now the dominant declining trendlines are not far away, so traders should reduce their positions, since the long-term trend is still clearly bearish.

A test of the lows is still in the cards in the coming weeks, and the coin remains on a long-term sell signal despite the short-term rally.  Support is found near $200, $180, at the low near$170, and at $160, while further resistance is ahead between $275 and $$280 and at $300.

Stellar/USDT, 4-Hour Chart Analysis

Stellar was among the strongest coins during yesterday’s rally, following Ripple higher, but now it is testing the key support/resistance zone between $0.2375 and $0.25 after entering a correction together with the broader market.

That said, the break-out is intact in Stellar, and traders could hold on to their positions here. Support levels are found near $0.21, $0.1930, and $0.1830, while further resistance is ahead near $0.2650 and $0.2850.

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 352 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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