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Weekly Analysis: Deep Crypto-Correction amid the Central Bank Show

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Weekly Recap

Asset Current Value Weekly Change
S&P 500 2434 0.23%
DAX 12750 0.31%
WTI Crude Oil 44.68 -2.24%
GOLD 1256.00 -1.02%
Bitcoin 2565 -10.11%
EUR/USD 1.1195 -0.10%

Central banks and cryptocurrencies stole the show this week, as the Bank of England, The Bank of Japan, the SNB, and most importantly, the Federal Reserve all held their monetary meetings, while the coins went through a major correction that shook the dominance of Bitcoin.  The banks sent unusually mixed signals, with the Fed alone causing confusing reactions in the different assets classes. The BOE also shocked the market with a very hawkish vote, while the BOJ reacted to the recent strength of the Yen in the only way that it possibly could, reiterating its uber-easy policies

Donald Trump continues to be under fire regarding his campaign’s Russian ties, but the market more or less ignores the scandal, even given the heavy media concentration. The flash-crash of the big tech names last Friday is something that is still making waves, as the NASDAQ remains technically wounded, and that could drag down global stocks in the coming week, despite the proximity of the all-time highs. The other major markets were generally flat, with the Japanese Nikkei outperforming in the second half of the week, as the Yen got weaker.

The Dollar’s rebound was all the rage in the fiat-currency world, although the Greenback ended the week on a negative note following the notoriously coming misses in the US economic indicators. Oil led the way lower for commodities lately, and the WTI contract is currently below $45 per barrel, while gold fell to $1250 and industrial commodities also remained under pressure.

WTI Crude Oil, 4-Hour Chart Analysis

Cryptocurrencies

-30%. Almost all major coins registered losses near or above that level this week, and although most of them are back way higher, the shadow of the correction is still on the market and on traders. Bitcoin triggered the broad sell-off, although Ethereum was also ripe for a deeper decline according to the long-term picture. Our pick Litecoin emerged strongly from the move lower, as it catapulted to new all-time highs today, hitting our trading target in the process. Ethereum rebounded by $100 or 40% in two days, and it sits 10% below its all-time highs, with BTC being down by 15%. Ripple, NEM, and Monero are the current laggards, while Dash and Ethereum Classic are holding on above their break-out levels from last weekend. The total value of the coin market is also back above the $110 billion level after falling below the $100 billion mark.

Litecoin, 4-Hour Chart Analysis

Economic Numbers

Economic releases were negative concerning most of the major countries once again, with the US indicators disappointing across the board. The CPI index and retail sales both missed by a mile, and although the Fed remained hawkish in the face of the deterioration, the bond market tells a different story, with US yield hitting a seven-month low during the week.  Australia and Canada delivered some good numbers, with the Employment Report and Manufacturing Sales surprising on the upside respectively. European indicators were mixed, with the UK showing weakness (retail sales, employment) and the Eurozone inflation finally matching expectations.

Technical Corner

NASDAQ 100 Futures, 4-hour Chart Analysis

The NASDAQ remained in the centre of attention this week, after the tech giants flash-crashed on last Friday, which caused nervous trading throughout the period, even as central banks took centre stage. The benchmark also finished the week on a negative note, following the announcement of the acquisition of Whole Foods by Amazon. The index finished near the recent lows, and it might be ready to hit new short-term lows next week, and test the long-term trendline near 5600.

Key Economic Releases of the Week

Day Country Release Actual Expected Previous
Monday JAPAN PPI Index 2.10% 2.20% 2.10%
Monday US Federal Budget Balance -88.4 bill 182.4 bill 182.4 bill
Tuesday AUSTRALIA NAB Business Confidence 7 13
Tuesday UK CPI Index 2.9% 2.7% 2.7%
Tuesday GERMANY Zew Economic Sentiment 18.6 21.8 20.6
Tuesday US PPI Index 0.0% 0.1% 0.5%
Wednesday CHINA Industrial Production -0.20% -0.20% -0.10%
Wednesday UK Average Earnings 2.1% 2.4% 2.4%
Wednesday UK Unemployment Rate 6.4% 6.4% 6.5%
Wednesday US CPI Index -0.1% 0.3% 0.2%
Wednesday US Core Retail Sales -0.3% 0.2% 0.3%
Wednesday US Crude Oil Inventories -1.7 mill -2.3 mill 3.3 mill
Wednesday US Fed Interest Rate Decision 1.25% 1.25% 1%
Wednesday US Fed Monetary Statement
Wednesday EUROZONE ECB Monetary Statement
Thursday AUSTRALIA Employment Change 42,000 10,300 37,400
Thursday AUSTRALIA Unemployment Rate 5.5% 5.7% 5.7%
Thursday SWITZERLAND SNB Monetary Statement
Thursday UK BOE Monetary Statement
Thursday US Philly Fed Index 27.6 25.5 38.8
Thursday US Initial Jobless Claims 237,000 241,000 245,000
Thursday US Industrial Production 0.0% 0.2% 1.0%
Friday JAPAN Monetary Statement
Friday EUROZONE Final CPI 1.4% 1.4% 1.4%
Friday US Building Permits 1.17 mill 1.25 mill 1.23 mill
Friday US Housing Starts 1.09 mill 1.23 mill 1.17 mill
Friday US Prelim Consumer Sentiment 94.5 97.2 97.1

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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4.7 stars on average, based on 443 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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3 Comments

3 Comments

  1. visiondream3

    June 17, 2017 at 6:23 pm

    Thanks for the litecoin input. Is it time to sell it yet? Is the rally losing steam?

    • Mate Cser

      June 17, 2017 at 11:08 pm

      Hi, I suggest closing a part of your position after this rally, and let some of it run further. Gradually exit the trade as LTC moves higher. It can still go higher but this way you protect your profits and it will psychologically be easier to get out before a correction.

      • visiondream3

        June 18, 2017 at 4:35 am

        Thanks Mate. Very valuable input. Keep up the excellent work you guys are doing.

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Analysis

Binance Coin Update: Wyckoff Breakout in Progress

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Binance Coin (BNB/BTC) is the altcoin market’s ultimate comeback kid. It was dead in the water on November 17, 2018 when it broke support of 0.0014. The market flipped the support into resistance two days later on November 19 to confirm the breakdown.

Binance Coin was supposed to enter a long bear winter. However, the market had other plans as it whipsawed everyone who panic sold the breakdown. In this article, we show how the Wyckoff Breakout is in progress in Binance Coin.

Wyckoff Spring

On November 28, 2018, Binance Coin dropped to as low as 0.001233. At that point, participants were convinced that the market broke down from either the large head and shoulders pattern on the longer time frame or a descending triangle on the shorter time frame. Even though the market was ripe for a bounce, almost everyone expected it to be the dead-cat type. Nevertheless, Binance Coin showed why it is always best to be prepared for both bull and bear scenarios.

The market suddenly rallied and took out both the head and shoulders neckline and the diagonal resistance of the triangle in one fell swoop. It then flipped both resistances into support on December 20, 2018. This is a classic example of a Wyckoff Spring.

BNB/BTC bear trap

As you can see, this price action is bullish. The smart money most likely accumulated positions from August 14 to November 17, 2018 while Binance Coin was range trading between 0.0014 and 0.0016. The breach below the support was the smart money’s method to tap into more liquidity. They shook the tree in order to accumulate more positions in a short amount of time. When they were done, they triggered the rally and the reversal.

Now that we know the smart money accumulated between 0.0014 and 0.0016, we can form the expectation that they will defend this range. More importantly, with the bear trap sprung, we can assume that Binance Coin is ready for the next stages of the model: the throwback and the markup.

Throwback

According to the Wyckoff model, Binance Coin is scheduled for a pullback before it can launch a bull run. The brief retracement is actually bullish. It would flip the former resistance into a firm support. This would enable the market to trend higher.

Wyckoff Model (Source: ScanStockCharts)

So far, Binance Coin has gone through the first three phases: accumulation, spring and breakout. The market is now trading above 0.0016, which used to be the range high. However, it is starting to show signs of weakness. Binance Coin is showing a bearish divergence on the daily RSI while trading close to overbought territory. On top of that, it is creating a rising wedge on the daily chart, which is a bearish pattern.

BNB/BTC bearish signals  

These signals are aligned to the next step of the Wyckoff Model, which is the throwback. The pullback will be healthy for the market. It will enable technical indicators to cool off as well as allow the market to establish a new base of buyers.

If you’re considering placing long positions in the market, the throwback to 0.0016 is a very good chance to do so.

Markup

Should Binance Coin pull back and stay above 0.0016, then the market would be ready for the next phase: the markup. This would be the start of the market’s bull run.

From Binance Coin’s market structure, we can see three heavy resistances: 0.002008, 0.0002287, and 0.00258. These would be the target prices to look for.

BNB/BTC heavy resistances

If all goes well, those who will be buying the throwback can potentially grow their investments by over 60%.

Bottom Line

Binance Coin is an altcoin that should be languishing in a bear winter. Instead, the market has managed to reverse its fortune through the Wyckoff model. It is likely that this market is on the brink of a massive bull run.

 

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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3.8 stars on average, based on 309 rated postsKiril is a CFA Charterholder and financial professional with 5+ 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

EOS Price Analysis: EOSIO 1.6 Update Enhances Speeds and is Cost Effective; Downside Price Risks Remain for EOS/USD

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  • EOSIO developers have released 1.6 upgrade, which sees enhanced speeds and is more cost efficient.
  • EOS/USD price action is ranging; given current behavior, a breakout may just be imminent.

The EOS price on Friday is seen trading down in minor negative territory. The price is caught in a very stubborn range. This behavior being observed could prove to be damaging in the coming sessions if the bulls do not break above resistance. EOS/USD is being dictated by a tough acting supply area, which is seen tracking from $2.60-$2.50 range. Then to the downside, a near-term demand zone is keeping the price propped up for now, $2.35-$2.25.

EOS/USD is moving within this consolidation mode, which has come into play since breaching a vital part of the bull’s recovery. An ascending trend line was seen tracking from 7th December 2018, right up until it was breached by the market bears on 10th January 2019.  This had coincided with the price running into chunky resistance at the psychological $3.00 price mark. It has not convincingly been above this region since the back-end of November 2018.

EOSIO 1.6 Release

EOSIO developers, who have been working on a system upgrade, have now announced the release of an upgraded version 1.6.0 of EOSIO. In terms of the impact of this development, they have instantly been noticeable and signaling a large improvement.  This new release does boast further features and fixes to improve upon the cumulative patches, which were implemented to enhance v1.5.

Details were provided by the company within an official Medium blog post. Updates on the EOSIO software will enhance efficiency for the peer-to-peer networking layer in addition to seeing real-time transactions improve overall transaction speed. They further stated that this release is something that had been planned as part of their progressive goals to improve their performance. They have intentions to maintain the fastest protocol across the market.

The development team tweeted, “Tests show upwards of a 35% increase in likely transaction speed. We are projecting noticeable improvements to sustainable transactions per second. In addition, reduced CPU costs, and lower latency on all EOSIO based blockchains.”

Technical Review – EOS/USD

EOS/USD daily chart.

The key for a new committed trend is to see a breakout from the confinements of the mentioned supply sitting above and demand zone below. Given the earlier detailed break below an ascending trend line, vulnerabilities remain, with the range-block formation.

Should the bears manage to force a drop below $2.25, then a new wave of selling will likely come into force. The next major area of support should be noted down towards the December 2018 low. $1.83 and then then $1.55 regions should be sought for potential comfort.

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.

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 110 rated postsKen has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.




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Analysis

3 Things You Need to Know About the Market Today: Trade Rally, Pound Pullback, Tesla Worries

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1, Trade Optimism Drives Rally in Stocks, Oil

Shanghai Composite, 4-Hour Chart Analysis

The US government is mulling to lift or ease some of the trade tariffs on Chinese goods, at least according to the reports that surfaced yesterday, and although the rumors were promptly denied by the Treasury, risk assets have been pushing higher ever since. Global stocks are trading at 1-month highs, with understandably, the major US indices and China leading the way higher. We expect further gestures by the two sides in the coming weeks, as the talks progress, but a final agreement could still be months away.

The most affected commodities, such as copper and oil are also up today, and but as we noted this weekend, the oversold rally in risk assets is stretched now. Also, even as the weaker global benchmarks, such as the Shanghai Composite have joined the party, the clear economic slowdown and the bearish technicals make the current environment hostile for bulls

2, Pound Retreats After Hitting 2-Month High Above 1.30

GBP/USD, 4-Hour Chart Analysis

Besides the Trade War saga, the likely delay of the Brexit deadline has been making waves all week long, and Pound bulls seem to like the idea of a possible “soft” deal with the European Union. The currency hit its highest level against the Dollar since mid-November, topping the 1.30 level, while British stocks are also trading near their 2019 highs.

Prime Minister Theresa May pledged to include the opposition parties following Wednesday’s no-confidence vote, but for now, even starting the talks is challenging, even though the government labeled the first talks “constructive”. In any case, with the chances of a no-deal Brexit being low right now, the Pound could enjoy further gains, especially as long as the global risk rally lasts.

3, Tesla Disappoints With Guidance, Cuts Workforce by 7%

Tesla (TSLA), 4-Hour Chart Analysis

While it held up very well during the recent tumroil in the stock market, Elon Musk’s crown jewel, Tesla (TSLA) has been down by as much as 8% today in pre-market trading after warning investors that the electric car maker will likely turn a smaller-than-expected profit in the coming quarter. Tesla is struggling to ramp up the production of the Model 3, while also facing difficulties to hit its cost goal with regards to its “mass” product.

With the traditional car makers slowly but surely closing in on the company, and given the looming cash flow issues, the coming quarters will crucial for the Musk. The company just avoided bankruptcy in its early days, and some bears think that the fierce competition and the production issues could lead to a crisis yet again. The company’s workforce skyrocketed in recent years, and today CEO Musk also announced that it will lay off 7%, approximately 3000 workers, to cut costs after the expansion. He stated that,

“We unfortunately have no choice but to reduce full-time employee headcount by approximately 7%, we grew by 30% last year, which is more than we can support, and retain only the most critical temps and contractors (…)”

While today, earnings reports will be few and far between, Netflix (NFLX) will also be in focus after reporting yesterday in after-hours trading, and for now, the streaming giant is also trading lower despite the broad overnight rally in stocks.

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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4.7 stars on average, based on 443 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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