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Analysis

Weekly Analysis: 5 Things to Watch the Coming Week

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Asset Current Value Weekly Change
S&P 500 2398 0.88%
DAX 12675 1.76%
WTI Crude Oil 46.47 -5.75%
GOLD 1228.00 -3.21%
Bitcoin 1570 16.11%
EUR/USD 1.0998 0.91%

5 Things to Watch Next Week

  1. More new all-time highs ahead for stocks?

While several cracks appeared under the surface of the current rally globally—the Chinese woes, the weak performance of the broad US indices, and the slowing US economic growth, the NASDAQ and German equities continued to trend higher to new all-time highs. The leadership of the advance is narrowing, and although that doesn’t mean that a decline is imminent and another leg higher following today’s French is possible, this is definitely not the best time to buy stocks.

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  1. Will the cryptocurrency market hit the $50 billion mark?

Litecoin and Ripple are the stars of the weekend so far among the coins, but Bitcoin is also holding up well despite the volatile correction towards the end of the week. The historic $50 billion level in capitalization is less than 10% away, and it’s hard to believe that the current boom won’t carry the market above that in the coming days, with more and more smaller coins popping up on the radar with stellar gains, like Bytecoin, Dogecoin, Steem, and Stratis.

  1. Is the sell-off in oil over?

Oil fell almost 20% in three weeks after a strong rebound in March, as US production keeps on rising and the recent geopolitical woes failed to prop up the market. Also, the North-Korean and Syrian tensions eased somewhat, even though the verbal bouts continued, and China increased the pressure on the communist regime. An escalation could propel a strong rebound in the Black Gold, as it got clearly oversold, even if the fundamentals remain bleak.

  1. Gold turning higher again?

Sentiment towards precious metals turned negative following the first round of the French election, and the confident words of the Fed pushed gold even lower in the second half of the week. Gold is now almost $80 lower than two weeks ago and that could mean that the metal is close to ending the current correction.  If stocks turn lower next week, gold might quickly snap back above the crucial $1240 level

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  1. The Pound in the spotlight as the Bank of England holds meeting

The GBP has been one of the strongest currencies since Theresa May announced a snap election three weeks ago, pushing the GBP/USD pair towards the 1.30 level. The Pound also held up well compared to the surging Euro, despite the ongoing dispute regarding the Brexit process that points more and more to a “hard” version of the break-up. With the Pound being stronger the pressure to protect the currency is lower on the BOE, so it’s easy to imagine that the central bank will rather try to boost growth, even if just verbally, causing a correction in the GBP.

The Pound in a strong uptrend against the US Dollar, 4-Hour Chart

In Focus: Cryptocurrencies

 

Weekly performance comparison of the major cryptocurrencies, Hourly Chart

Bitcoin took center stage this week, even considering the HUGE rally in Ripple and Litecoin, as the main cryptocurrency stormed to new all-time highs, hitting the $1600 level that seemed so distant just over a month ago, amid the hard-fork fears. BTC breached the $25 billion level this week for the first time in its history, and although a correction is a real possibility here, the currency is hovering just below its highs this weekend. Ripple and Litecoin are on the move once again with LTC copying its weekend break-out from two weeks ago, while Ripple doubled in the course of the last week. The market capitalization list was little changed despite the strong moves although Dash is sliding lower with NEM and ETC both on its neck after the crazy period.  With buy signals all over the market traders were able to ride major break-outs almost on a daily basis, and hopefully, the favorable conditions will persist throughout the next week as well.

Currency Weekly Volume Monthly Volume Market Cap
Bitcoin 4,370 11,044 25,664
Ethereum 1,475 3,721 8,769
Ripple 652 1,157 5.041
Litecoin 988 2,767 1,531
Dash 126 462 729
NEM 52 151 689
Ethereum Classic 339 830 654
Monero 90 247 429


Key Economic Releases of the Week

Day Country Release Expected Previous
Monday CHINA Trade Balance 197 bill 164 bill
Monday GERMANY Factory Orders 0.70% 3.40%
Monday UK Halifax HPI 0.1% 0.0%
Tuesday AUSTRALIA Retail Sales (monthly) 0.3% -0.1%
Tuesday AUSTRALIA Annual Budget
Tuesday CANADA Building Permits (monthly) 0.40% -2.50%
Tuesday US JOLTS Job Openings 5.67 mill 5,74 mill
Wednesday CHINA CPI Index 1.10% 0.90%
Wednesday CHINA PPI Index 6.8% 7.6%
Wednesday EUROZONE ECB President Draghi Speaks
Wednesday US Import Prices (monthly) 0.2% -0.2%
Wednesday US Crude Oil Inventories  – -0.9 mill
Thursday SWITZERLAND CPI Index 0.20% 0.20%
Thursday UK Manufacturing Production -0.20% -0.1%
Thursday UK Service PMI 54.6 55.0
Thursday UK Official Bank Rate 0.25% 0.25%
Thursday UK Monetary Statement
Thursday UK PPI Index 0.2% -0.1%
Thursday CANADA NHPI Index 0.3% 0.4%
Friday GERMANY Prelim GDP 0.6% 0.4%
Friday US CPI Index 0.20% -0.30%
Friday US Core CPI 0.2% -0.1%
Friday US Retail Sales (monthly) 0.60% -0.20%
Friday US Core Retail Sales 0.50% 0.00%
Friday US UOM Consumer Sentimnet 97.0 97.0
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Analysis

Bitcoin’s Record-Breaking Rally Continues as Prices Cross $8,100

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Bitcoin surged to new highs on Sunday, as the world’s largest crypto by market cap continued to generate bids following the cancellation of Segwit2x.

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BTC/USD Price Levels

The value of a single bitcoin reached a daily high of $8,110.59, its best level on record. At press time, BTC/USD was valued at around $8,002 for a gain of 4%.

With the gain, bitcoin’s market cap now exceeds $133 billion. That’s roughly $100 billion greater than Ethereum, the market’s second most valuable cryptocurrency.

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Bitcoin has added more than $1,100 over the past five sessions. It was down around $5,600 just one week ago.

Bitcoin Cash (BCH), a digital currency alternative that broke away from the original blockchain Aug. 1, was down 5.1% at $1,185. BTC and BCH locked horns earlier this month after the Segwit2x hard fork was abandoned.

$10,000 and Beyond?

Institutional clearing platform LedgerX has initiated its first long-term bitcoin futures option, which is set to expire Dec. 28, 2018. In setting up the option, LedgerX is assuming a price of $10,000 at the time of expiration. That’s a 25% premium on current levels.

Investors who buy the option are essentially saying they believe prices will exceed $10,000 by the time of expiration.

Bitcoin is being helped by growing institutional demand for the digital currency, as hedge funds, day traders and other mainstream investment outfits look to access this burgeoning asset class. CBOE and CME Group have each announced plans to integrate bitcoin into more conventional investment vehicles in the coming months.

The rush of institutional money into bitcoin is a sure sign that the digital asset class is becoming too big to ignore. The value of all cryptocurrencies in circulation has already exceeded $230 billion, with more than a dozen coins valued at $1 billion or more. Nine others have a market cap of $500 million or greater.

Coinbase Responds

The rise of institutional capital has also compelled Coinbase to introduce a custodial service targeted at account holders with more than $10 million in assets. This service targets hedge funds and other institutions that have remained largely on the sidelines of the crypto revolution.

In a recent blog post, Coinbase CEO Brian Armstrong announced that the new service will launch sometime next year.

“When we speak with these institutions, they tell us that the number one thing preventing them from getting started is the existence of a digital asset custodian that they can trust to store client funds securely,” Armstrong wrote.

In addition to maintaining the minimum $10 million asset requirement, institutions must pay a $100,000 setup fee to gain access tot he Custodial program. In response, institutional investors will receive assurance that their assets are secure.

The Coinbase Custody website lists broad support for bitcoin, Ethereum (ETH) and Litecoin (LTC), as well as ERC20 tokens. The ERC20 protocol has emerged as the favorite for startups launching initial coin offerings (ICOs), a controversial crowdfunding model that has already overtaken early stage venture capital.

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. 

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Cryptocurrencies

Is Ethereum Ready to Play Catch Up With Bitcoin?

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In mid-June of this year, the difference between the market capitalization of bitcoin and Ethereum had narrowed down to less than $8 billion. This had many market participants excited. They expected Ethereum to dethrone bitcoin as the leader, a move popularly termed as flippening.

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Key observations

  1. Ethereum has hugely underperformed bitcoin
  2. The chart pattern suggests that Ethereum is likely to play catch up in the next few months
  3. Stay on the long side of Ethereum to benefit from the bullish setup

However, fast forward five months and the difference in the market capitalization of the top two cryptocurrencies has increased to about $96 billion. This shows that while bitcoin has raced ahead in the past few months, Ethereum has hugely lagged behind.

However, is the underperformance about to end?

The chart pattern shows that Ethereum is likely to embark on a rally of its own that can carry it to $645 to $670 levels in the next few months. Let’s see how we arrived at these levels.

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Ethereum opened trading at $8.16 on January 1, 2017. It started its rally in March and by June 12, it reached a high of $420, an astronomical rally of about 5047%. Thereafter, it entered a period of consolidation, digesting the gains.

On the charts, Ethereum has formed a large symmetrical triangle, which usually acts as a continuation pattern. The breakout is generally in the direction of the long-term trend, or the trend that was prevailing before the pattern formed. In this case, the sharp move from January to June confirms that the cryptocurrency was in an uptrend before forming the triangle.

However, this is not a fool proof trade because sometimes the symmetrical triangle acts as a reversal pattern. Therefore, the best way to play this trade is to wait for a breakout of the triangle before initiating any trade.

Where can we take an entry?

Currently, the resistance line of the triangle is at about $378 levels, a level close to today’s intraday highs. The bears are likely to strongly defend this level. However, if the bulls breakout of $378 and manage to close above the resistance line, the trade on the long side will set up.

Different traders use different methods to confirm whether the breakout is valid or not. Some wait until price moves 3% above the breakout level, others wait for three consecutive closes above the resistance level.

However, we have observed that the best breakouts never look back, hence, waiting for three days may lead to a missed opportunity. Therefore, we can wait for a closing above the resistance line of the triangle and initiate the long positions on the following day.

The breakout can face resistance at $400 and $420. However, we expect the virtual currency to scale both these resistances and rally towards its pattern target zone of $645 to $670.

Notwithstanding, even the most reliable patterns can fail. Therefore, our stop loss will be kept at $340. We don’t want to hang on to the trade if it falls back into the triangle. We shall raise our stops to breakeven as soon as Ethereum breaks out to new lifetime highs. From thereon, we shall trail the stops higher to protect our paper profits.

Note

The chart pattern suggests a resumption of the long-term uptrend in Ethereum. However, this will not get confirmed until the cryptocurrency breaks out and sustains above $380. Therefore, please initiate positions only on a breakout and close above the triangle. Entering presumptive trades may result in losses.

Featured image courtesy of Shutterstock. 

 

 

 

 

 

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Analysis

Long-Term Cryptocurrency Analysis: Bitcoin Flirts with $8000 as Altcoin Bull Persists

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Bitcoin’s swift recovery was the main topic of the week, as the most valuable coin not just regained its steep losses, but hit a marginal new high towards the end of the period. The entire segment is experiencing capital inflows as the total value of the coins climbed above $230 billion for the first time ever after finally leaving the vicinity of the $200 billion mark.

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BTC breached the $8000 level before turning slightly lower on Friday, but despite the severely overbought daily chart, it is still trading near its all-time highs. As the long-term picture still suggests a deeper correction, investors should wait with opening new positions and traders should also control position sizes here. Key support levels are found at $7700, $7000, and $6700, while the recent key break-out level at $5000 still hasn’t been re-tested.

BTC/USD, Daily Chart Analysis

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Dash is still the most bullish altcoin from a technical standpoint, despite this week’s short-term correction, as the coin is trading above its prior all-time high, and this weekend, it looks ready to test the break-out high near $500. Support levels are still found at $400, $360, and $330, and as the long-term picture is approaching overbought territory, investors should only hold on to their positions here.

DASH/USD, Daily Chart Analysis

The other major altcoins are also mostly in bullish setups, with some of them already in the latter stages of this cycle, like Monero and IOTA, but elsewhere in the segment, there are still opportunities for both traders and investors. Let’s see the detailed long-term view.

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