There Are Clear Signs Of Bullish Pressure In The Cryptocurrency Market

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There Are Clear Signs Of Bullish Pressure In The Cryptocurrency Market

Weekly Outlook – What’s Going On With Monero, Dash, EOS and Stellar

The crypto market is starting to show minor yet clear signs of bullish pressure, with more and more coins jumping to double digit percentage gains over the last few days. The overall market capitalization holds steady around $120 billion but don’t jump on the bandwagon just yet. We are still in a long term crypto downtrend so there is elevated risk.

Currently trading near $48.00, Monero is up 11.45% during the last 7 days and sits at number 13 in the CoinMarketCap rankings. After establishing support at $39.0, the USD/XMR pair traded for an extended period just above the level but now we can see an attempt to break out to the upside. In the long term context, this jump doesn’t mean all that much because the pair is in a clear downtrend but at least it’s a sign that the buyers are becoming interested. If this move gains some traction we may see a follow up into the 100 days EMA (red line), maybe as soon as the end of the week.

Dash is trailing behind Monero and is the 15th cryptocurrency by market cap, with a total value of $710,434,207 and trading at 82.35 against the US Dollar. Dash was in a strong downtrend for the entire 2020 and seems to have bottomed out around $59.0. The last 7 days have been prolific for the cryptocurrency, which posted 21.61% gains and entered into the space between the 50 days EMA (blue) and 100 days EMA (red). This territory is a resistance zone, so if the bulls don’t manage to break above it, we will probably see a re-test of the support at the 50-day EMA.

This is one of the few cryptocurrencies to print an all-time high during the 2020 crypto market crash, but it’s been downhill ever since that huge climb. Currently EOS is sitting at the 5th spot in CoinMarketCap rankings with a total market cap of $2,508,907,807 and a trading price of 2.77. Having bottomed out at $1.60 the pair has staged a minor recovery and is now attempting to break the 100 days EMA (red). Unless we see a breakout above said moving average, the chances of a significant recovery are slim and we might see a drop below the 50 EMA (blue) by the end of the week.

Of the four coins analyzed today, Stellar is the only one in the red, having lost more than 2.50% over the last 7 days. The coin is trading at 0.076 against the US Dollar with a total market cap of $1,463,572,273. This puts it at number 9 by market capitalization but that rank is tenuous. Stellar recently broke its all-time low located at 0.092 and is now trading in 0.07 area with the two EMAs crossed bearish and spread apart. All these are bearish signs, so the pair may go lower by the end of the week. However, it must be noted that the RSI has exit oversold territory which is about the only bullish sign present, but it may just be setting up for another move lower.

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Bitcoin Price Analysis: There May Still Be Some Life in These Exhausted Bulls

Over the last week, the BTC-USD market has seen some major price swings. At one point, the price nearly reached $4500 only to see it pull back down to the low $4100s. And now, within two days, the price has topped back out in the low $4400s. There has been some major chop and seemingly erratic dumps and price hikes, but overall there seems to be a common upward trent within the macro market movements:

Figure 1: BTC-USD, 4-Hour Candles, Bitfinex, Macro Trend

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Since the bottom of the bear run last month, bitcoin has seen several rallies that have continued along a generally positive trend. The figure above shows a trend of higher highs, higher lows and an upper/lower boundary that is converging. This type of price activity is called a rising wedge.

Coupled with this price growth is a trend of decreasing volume throughout the length of the wedge. A rising wedge is generally a bearish trend that shows weakening bullish pressure as each subsequent rally becomes smaller and smaller. As the price corrects, there are rallies that bring the price to new highs, but ultimately rally on smaller and smaller volume.

As of the time of this article, the latest rally has failed to make a new high in the low $4400s. A breakdown of this wedge could lead to a substantial price drop of approximately $500 below the point of breakdown. The approximate price target would be around $3700.

Although rising wedges are bearish in nature, that doesn’t mean new highs aren’t in store for bitcoin. The macro trend is currently showing a potential bearish move, but there is still some strength in the market. The market is currently trending above the 50 EMA and 200 EMA which, by many standards, is representative of a trending bullish market. Although the price is trending upward and the overall EMA signals are showing potential upward continuation, there are pretty clear signs of bullish exhaustion on the macro scale:

Figure 2: BTC-USD, 4-Hour Candles, Bitfinex, Bullish Exhaustion

As stated earlier, the rising wedge is paired with decreasing volume which is a clear giveaway that upward momentum is waning. To complement this exhaustion, the RSI and MACD are showing clear signs of bearish divergence in the current market and are demonstrating a lack of the bullish momentum necessary to sustain a bull market.

If the rising wedge breaks to the bottom, we can expect the support levels to lie on the Fibonacci Retracement values shown above. The ultimate price target of the rising wedge would have BTC-USD testing the 50% retracement values.

On a very, very macro scale, there are clear signs of overall bullish exhaustion since the beginning of its run from the low $1000s:

Figure 3: BTC-USD, 1-Week Candles, Bitfinex, Macro Bullish Exhaustion

Two very clear indicators of bullish momentum loss lie on the RSI and the MACD. The price of bitcoin has pushed to strong, new highs but it has left the momentum indicators weakening. The RSI is showing strong macro divergence, and the MACD is on the verge of flipping bearish for the first time since the ETF was denied back in April.

It’s not hard to argue that bitcoin has seen heavy price growth and needs a little room to breath. It is entirely possible the market won’t see any strong pullback and it may go sideways. However, in the event that a sustained market pulls the price down, we can expect to find support along the midline of the Bollinger Bands in the low $3000s. It’s important that the above chart and market implications of this macro divergence are occurring on candles that are one week. So, while this doesn’t mean the market will just suddenly plummet, it is important to understand that a substantial price drop could be in bitcoin’s future.

Even though I gave plenty of bearish arguments, it should be noted that these predictions are on a macro scale, and the immediate trend is showing strong support along the 50 and 200 EMAs. The market is bullish until proven otherwise. As the saying goes: “the trend is your friend.” Bitcoin has had one heck of a year so far, but I think it’s important to point out the clear signs of a macro bullish exhaustion:

Summary:

Bitcoin is finding support and showing a bullish trend along the 50 and 200 EMAs.

On a macro level, the trend is pushing upward but is showing a potential bearish move if the market breaks out of the rising wedge identified in Figure 1.

A breakout of this wedge would have its price target in the $3700s.

Trading and investing in digital assets like bitcoin, bitcoin cash and ether is highly speculative and comes with many risks. This analysis is for informational purposes and should not be considered investment advice. Statements and financial information on Bitcoin Magazine and BTC Media related sites do not necessarily reflect the opinion of BTC Media and should not be construed as an endorsement or recommendation to buy, sell or hold. Past performance is not necessarily indicative of future results.

Ten Chart Patterns for Crypto Technical Analysis

Trading cryptocurrencies doesn’t have to be guess work. Crypto prices often move in patterns. The patterns are formed due to a number of factors, including movement between support and resistance levels, market sentiment, and the emotional response investors have to certain price levels.

These patterns can many times predict what direction the price will go in the future, and can even help to predict price targets with a surprisingly high level of accuracy. The patterns can also help advanced traders understand where to place stop orders – a type of cryptocurrency exchange order type that sells an asset at a specified price once the price is reached – to avoid taking a loss, or to avoid missing out on a rally.

Covesting’s Crypto Intelligence portal is equipped with a number of resources for you to learn how to identify these patterns, including a Trade Ideas section with charts from top traders. To get you started, here are ten of the common patterns that can be identified in cryptocurrency price charts, and can help you become a more profitable cryptocurrency trader.

Bullish Patterns

Bull Flag

A bull flag occurs when sellers are overwhelmed by a strong break of resistance with volume from buyers that results in a long pole. Once the pole’s advance is broken, the flag forms, often tilting slightly downward. Bull flags can be seen both as a reversal pattern as well as a continuation pattern. The flag is comprised of price movement between two parallel trendlines until either trendline is broken – typically to the upside as bull flags are bullish chart patterns.

Ascending Triangle

Ascending triangles show strength from bullish buyers, as the buying pressure causes the price to form increasingly higher lows, creating an ascending lower trendline. The upper resistance trendline is flat, until it is finally broken toward the apex of the triangle.

Falling Wedge

In a falling wedge, a series of lower highs and lower lows are forming, creating a downward-sloping, wedge-like pattern as the range tightens and price consolidates. Falling wedges can form both as a continuation pattern and as a reversal pattern. However, a falling wedge forming at the bottom of a downtrend will typically signal a reversal, while a falling wedge during an uptrend usually signals a continuation. This makes the falling wedge a bullish pattern.

Bearish Patterns

Bear Flag

A bear flag occurs when buyers are overwhelmed by a strong break of support with volume from sellers that results in a long pole. Once the pole’s decline finds support, the flag forms, often tilting slightly upward. Bear flags can be seen both as a reversal pattern as well as a continuation pattern. The flag is comprised of price movement between two parallel trendlines until either trendline is broken – typically to the downside as bear flags are bearish chart patterns.

Descending Triangle

Descending triangles show strength from bearish sellers, as the selling pressure causes the price to form repeated lower highs, creating a descending upper trendline. The lower support trendline is flat, until it is finally broken toward the apex of the triangle, usually to the downside. In a recent example, Bitcoin was in a descending triangle for most of 2020 when it finally broke to the downside, bringing it to new yearly lows.

Rising Wedge

In a rising wedge, a series of higher highs and higher lows are forming, creating an upward tilting wedge-like pattern as the range tightens and price consolidates. Rising wedges can form both as a continuation pattern and as a reversal pattern. However, a rising wedge forming at the top of an uptrend will typically signal a reversal, while a rising wedge during a downtrend usually signals a continuation. This makes the rising wedge a bearish pattern.

Neutral Patterns

Symmetrical Triangle

Symmetrical triangles indicate two things: indecision in the market, and price consolidation. Price ping-pongs between an increasingly tightening range, forming both lower highs and higher lows. Symmetrical triangles can break up or downward, and can be found during both uptrends and downtrends, giving it its neutral pattern designation. Volume usually trends downward as both buyers and sellers wait for a clear break to either side. The break typically occurs three-quarters of the way to the triangle’s apex.

Reversal Patterns

Head and Shoulders

Head and shoulders tops are important reversal patterns to watch out for in an uptrend, that can often signal that the uptrend is about to end. The pattern itself displays a “tug-of-war” between buyers and sellers as there is indecision in the market, and the pattern is a clear sign that the tides are turning from an uptrend into a downtrend. Price increases until a rejection occurs and the price forms a left shoulder. The uptrend appears to resume, breaking the previously rejected resistance level, but is rejected more strongly at the next key resistance level, forming a head. At this point, volume begins to decline as traders become wary that their current position may be in danger. Finally, when the price is then rejected again, creating a right shoulder. As the right shoulder price movement breaks the neckline, traders exit their position which creates a strong increase in sell volume and a powerful reversal.

Double Bottom

A double bottom – sometimes called a W bottom when the sides of the structure are uncommonly tall – forms when a strong bounce occurs at the same support level twice. The second bounce gives investors increased confidence in the strength of the support level and seller’s inability to push the price to new lows. Buyers typically follow through with volume which can often signal a strong reversal and a rally results.

Inverse Head and Shoulders

The inverse head and shoulders bottoms are exactly what it sounds like: a head and shoulder top in inverse. The same market sentiment and trader emotional states are at play, simply in the opposite direction. Inverse head and shoulders bottoms are important reversal patterns to watch out for in a downtrend, that can often signal that the downtrend is about to end. The pattern itself displays a “tug-of-war” between sellers and buyers as there is indecision in the market, and the pattern is a clear sign that the tides are turning from a downtrend into an uptrend. Price decreases until a bounce occurs and the price forms a left shoulder. The downtrend appears to resume, busting through the previous support where the bounce occurred, but beyond this at the next support a stronger bounce happens, forming a head. At this point, volume begins to decline as traders become increasingly indecisive. Finally, the price bounces at support yet again, creating a right shoulder. As the right shoulder price movement breaks the neckline, traders scramble to enter positions which creates a strong increase in buy volume and a powerful reversal.

All chart pattern examples courtesy of John Kelvin. Kelvin’s charts and trade ideas can be found in Covesting’s Crypto Intelligence portal in the Trade Ideas section. There, many additional chart patterns can be found. We recommend you familiarize yourself with these patterns to become a more profitable trader.

Still confused by price charts but want to get into trading? Covesting is preparing its exclusive copy-trading feature for launch this year, which will allow novice traders to mimic the trades of top cryptocurrency traders in the industry. Sign up today to create your trader profile so you can be ready when the copy-trading features launches, and in the meantime enjoy the most cutting edge trading platform in the entire cryptocurrency space.

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