Most major cryptocurrencies are in a consolidation, which will soon result in a large directional move. How should traders be placed in order to benefit from it?
A draft report by the G7 group of nations outlined the risks associated with “global stablecoins.” The report said: “No stablecoin project should begin operation until the legal, regulatory and oversight challenges and risks are adequately addressed.” This report is likely to increase the troubles for Facebook’s Libra project.
Former Commodity Futures Trading Commission chairman Christopher Giancarlo believes that Libra and the prospects of central bank digital currencies will increase regulator’s intrusions into the crypto space.
This can work as a double-edged sword. If regulators provide clarity, it is likely to attract large institutional players into the game, but if the regulators only look to stifle projects and create hurdles, crypto-sector growth could take longer than expected.
Billionaire investor Tim Draper believes that with its borderless nature and decentralization, Bitcoin (BTC) will bring the world together. According to Draper, it will change the way governments and politicians operate worldwide. He further goes on to say that “Bitcoin brought with it a few fundamental technologies that can accelerate our transformation from a tribal planet to a global one.”
In the short-term, regulatory uncertainty appears to be placing a cap on cryptocurrency prices. Let’s see if we spot any buy setups in the major cryptocurrencies.
Bitcoin has been consolidating between $7,700 and $8,770 for the past few days. This shows a balance between both the bulls and the bears. Such phases of consolidation are often followed by a sharp directional move.
If the price breaks out to the upside, it will indicate that the current consolidation period was used by the bulls to accumulate. On the other hand, if the price breaks down out of the range, it will indicate a period of distribution. It is difficult to predict the direction of the breakout, hence, it is best to enter after the Bitcoin makes a decisive move.
If the bulls can push the price above the range, a move to the downtrend line of the symmetrical triangle is possible. A breakout of the downtrend line will signal the end of the correction and the start of a new uptrend.
Contrary to our assumption, if the bears sink the BTC/USD pair below the $7,700 to $7,337 support zone, it will be a huge negative. Such a move will delay the recovery and can extend the down move to $5,533, which is also at the 78.6% Fibonacci retracement level of the most recent rally. Therefore, aggressive traders who hold long positions can retain the stops at $7,700.
Though Ether (ETH) fell below the support at $185, the bears could not capitalize on the advantage. The price has been trading just below $185 for the past three days. This shows that bulls are buying on minor dips and are not waiting for a deeper fall to make entries.
The bulls will once again attempt to clear the overhead resistance zone of $185 to $196. If successful, a rally to $224 and possibly $235 is possible.
Conversely, if the bulls fail to scale the resistance zone, the bears will attempt to sink the ETH/USD pair to $164. A break below this support can drag the price to $152. Therefore, for now, aggressive traders can retain the stops on their long position at $160. We will suggest trailing the stops to $175 after the price rises above $200.
XRP bounced off the moving averages on Oct. 12 and is currently attempting to break out of the overhead resistance at $0.29227. The 20-day EMA is slowly sloping upward and the RSI has climbed into positive territory, which shows that bulls have made a comeback.
If buyers can push the price above $0.29227 and sustain it, a rally to $0.34229 is probable. Traders can keep a stop loss on the long positions at $0.215. We would suggest trailing stops higher if the price moves northwards.
Contrary to our expectation, if the bulls fail to sustain the price above $0.29227, the XRP/USD pair might remain range-bound between $0.220 to $0.29227 for a few more days. The downtrend will resume on a break below the critical support of $0.22.
Bitcoin Cash (BCH) remains stuck inside the range of $203.36 to $236.07. The altcoin’s failure to even retest the breakdown level at the neckline is a negative sign. This shows a lack of urgency among the bulls to buy at the current levels.
The bears will now try to sink the BCH/USD pair below the low of $203.36. If successful, a drop to $166.98 is likely. On the other hand, if the bulls propel the price above $241.85, a pullback to the neckline is possible.
A short-term trading opportunity will present itself for the aggressive traders on a breakout and close (UTC time) above $242. Until then, we remain neutral on the cryptocurrency.
Litecoin (LTC) has not given up much ground after turning down from the 20-day EMA, which shows buying on dips. The bulls will again attempt to push the price above the 20-day EMA. If successful, a move to the downtrend line of the falling wedge pattern is likely.
A breakout of the downtrend line will be a positive sign and will indicate a change in trend. The next level to watch on the upside is $80.2731.
Nevertheless, if the bears fail to break out of the 20-day EMA, a few more days of consolidation is likely. The LTC/USD pair will turn negative on a break below the recent lows of $50. We will wait for the price to break out and close (UTC time) above the downtrend line before turning positive.
EOS has been trading close to the 20-day EMA for the past six days. Both moving averages have flattened out and the RSI is just below the midpoint. This shows a state of equilibrium between the bulls and bears.
If the buyers can push the EOS/USD pair above the downtrend line and the 50-day SMA, it will indicate that the markets have rejected the breakdown below $3.1534. If the price sustains above the 50-day SMA, a rally to $4.24 and above it to $4.8719 is possible. Traders can initiate long positions as suggested in our earlier analysis.
However, if the bulls fail to scale above the 50-day SMA, the pair might remain range-bound for a few more days. It will turn negative on a break below the recent lows of $2.4001.
Binance Coin (BNB) bounced off the previous resistance turned support of $16.4882 on Oct. 12. This shows the formation of a higher low in the short-term time frame. The 20-day EMA is flattening out and the RSI has risen above the midpoint, which suggests that the selling has subsided and the bulls are gradually making their presence felt.
However, the relief rally is now likely to face stiff resistance at the 50-day SMA. If the bulls can push the BNB/USD pair above the 50-day SMA and the resistance line of the channel, it will signal the end of the downtrend. Therefore, we suggest a long position on a breakout and close (UTC time) above the channel with stops placed at $14. The target objective on the upside is $32.
Contrary to our assumption, if the pair turns down from the overhead resistance and plunges below $16.4882, a retest of $14.2555 will be on the cards. If this level also cracks, the downtrend will resume.
Bitcoin SV (BSV) continues to trade in a tight range of $78.506-$90.40. This shows a balance between buyers and sellers. Neither party is confident about the next directional move, hence, they are playing it safe.
The longer the consolidation, the stronger the eventual breakout or breakdown from it will be. If the bulls succeed in breaking out of the range, a move to the 50-day SMA is possible. This is a stiff resistance to watch on the upside because the bulls have not been able to scale it since Jul. 11. Hence, a move above the 50-day SMA will signal a likely change in trend.
Conversely, if the tight range resolves to the downside, a dip to the recent lows of $66.666 is likely. If this support also cracks, the BSV/USD pair will resume its downtrend. As the pair has been in a strong downtrend, we will wait for a reversal pattern to form before proposing a trade in it.
The dip in Stellar (XLM), in the past three days, could not challenge the immediate support of $0.055901, which shows that buyers are keen to enter on minor dips. The bulls will now try to push the price above the overhead resistance of $0.064886.
If successful, a move to the downtrend line and above it to $0.088708 is possible. The moving averages have flattened out and the RSI has risen above 50, which suggests that bears are losing their grip. Therefore, traders can continue to protect their long positions with stops at $0.051.
Our bullish view will be invalidated if the XLM/USD pair reverses direction from $0.064886 and plummets below $0.051014. However, we give this a low probability of occurring.
Tron (TRX) is attempting to bounce off the moving averages, which is a positive sign. It shows that buyers are keen to defend the support. The price could gradually move up to the overhead resistance of $0.018660. This is an important level to watch out for because the price has repeatedly turned down from it.
If the TRX/USD pair again reverses direction from $0.018660, a dip to the uptrend line and below it to the moving averages is likely. A breakdown of the moving averages can drag the price to $0.011240.
Conversely, if the pair can climb above $0.018660, it is likely to pick up momentum. The first target is $0.0256938 and above it $0.030. Therefore, traders can initiate long positions as suggested by us in an earlier analysis.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
Market data is provided by HitBTC exchange.