The purpose of this article is to provide some insight into potential upcoming trades and portfolio management across several markets.
The crypto market finally came alive Thursday as the market rallied with positive news coming from SEC Commissioner Robert Jackson, and Speech by Hester Pierce. Most of us believe that a Bitcoin ETF will eventually be approved, yet this was a perfect example of how news can affect sentiment quickly.
Since the market appears to have taken a turn, we put together a special SC weekly that focuses on the larger cap crypto names and one that is new to our discussion. Very small cap under the radar, or at least ours, but Marc found it while going over charts.
Tomorrow on the radio show we have a special guest and new SC Team member, blockchain expert Steven Lubka. If there is a coin you are wondering more about, or how it compares to its peers please email me your question and we will attempt to include it in the show.
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BTC Daily: (Coinbase Chart)
“The market needs a catalysts to start to move higher” and finally we had a little positive news that sparked the current rally. The question here is does Bitcoin follow through?
The 38.2% retrace of the swing is an important level, as the previous two swings gave back less than 38% of the initial bullish move. Yet we would still consider the move solid if it holds above the 3500 level, which is both psychological and about a 50% retrace of the swing.
The reason we use stops is what happened to the previous move in early January, where consolidation did not result in a continuation, but resulted in capitulation retesting the support which is now the current resistance level Bitcoin is attempting to push through.
What is important to understand about these levels is there are those who added as evident with the price action, and we consider them bag holders. IF enough of them get cold feet and decide to exit with a small loss, this could lead to a push lower and a retest of the 3400 area.
Since we already have a position trade entered at 3550 and 5600 we are in no hurry to add, unless we see a retest of the 3000 area. I never mind dollar cost averaging but do not want to over exhaust my capital in the event a pullback occurs.
As bullish as this swing is, and though we are starting to see a broader structure form, we still need to remain cautious. We are looking for a swing higher, but the weekends for the most part have been non-eventful until the futures open.
I know many are talking about futures expiration dates etc. but these are so used by the majority as an indicator that they are most likely insignificant at this point.
For a couple weeks I have been favoring Litecoin over its peers. It was exuberating more strength and in my opinion was setting up for a long trade. Had I not already been in the Bitcoin long trade, I would have taken the more aggressive Litecoin trade posted to the expert swings chat group.
I still favor Litecoin and will be looking to add to my inventory. It will likely come at the cost of other coins that are not performing as well. I mentioned this recently in a premium article and will be making some portfolio changes in the near term.
This is an important area technically for Litecoin to push through. The dotted red line is the broader trend which is critical to push through, but to add to it, there are numerous overlapping resistance levels in this area as well.
Yet Litecoin is not showing any signs of falling apart here. The 40.0 level is the 38.2% retrace of the bullish swing and we are nearly 8% higher than that currently. This is also a psychological level from the standpoint of round and even numbers. But there are a few more indicators that may evidence of a reversal off a bottom here.
For positioning and swing trades the weekly is the backbone of our analysis. There is much evidence here pointing that a bottom MAY be in place. There was an initial signal back in early December of a bullish reversal via a pinbar, yet we held caution there as the previous lows below 100 that provided the same signal failed.
This was a purely a contrarian trade as we wrote about at that time. Those who had the guts and the grit to blindly buy into the abyss of pain have been rewarded nearly 2-fold. I personally was not one of them though I have added some inventory in several instruments since.
Yet now that the structure is more defined, we can look for evidence that a bottom may be in place starting with the previous consolidations.
The initial consolidation around the 80.0 area formed a typical pinbar but the following candles were mixed and there was no subsequent rally. Keep in mind hindsight is 20/20 and at that time in July it was an area for a potential reversal, yet it failed and pushed lower.
Around the 60.0 area it found initial support and once again a bullish pinbar ensued. This was followed up with a slight rally to 65.0 which quickly gave back all of the gains the following week. It attempted once again to rally but it started to fade out failing to take out the previous high in the subsequent rally.
We noticed this was a common theme and reduced exposure in a few coins, closing positions in a couple more in October as the market was not reacting how we would expect. One coin we did not take off was Litecoin due to his price and longevity of being adopted.
The selloff in November continued until December where one again we had a bullish pinbar. This resulted in a solid rally and the subsequent pullback gave back around 60% of the swing. The current rally off this support level is positive, but the fact it took out the previous high as well adds further evidence to a potential broader term reversal.
Still work to do:
Though it took out the intermediary bearish trend channel it is finding resistance at the broader trend. Litecoin needs to push through this trend-line to further provide evidence this move is real. With that said, and like a typical extreme pullback there are numerous areas of resistance along the way starting in the 55.0 area.
The first major resistance level is found at 100 which is a psychological and previous support now resistance area. To put the bear market in perspective, Litecoin would have to push to the 175.0 area to gain back 38% of the broader bearish swing.
In short as optimistic as we are right now with Litecoin, there is a lot of work to do for the market to get back into bullish territory. This is definitely on both our swing and position trade radar and we are looking to add to our inventory as well.
ETHUSD (Coinbase daily)
Ethereum investors can breath a sigh of relief here as it pushes into the initial resistance area between 115 and 125. Similar to Litecoin the pullback off the swing has been very shallow which may imply strength, or further weakness to come. Sounds like we are taking both sides here but we are really looking for some further evidence.
If Ethereum can take out he 125 level we are very likely to start pushing to our target of 150.0. If it fails to hold the 110.0 level than we will consider this a sign of weakness and may further reduce our inventory, placing it in coins showing more strength like Litecoin.
Simply nothing to do here but let the market play out. This is not on our short list candidate for a swing trade.
Similar chart pattern with Litecoin, yet it has not taken out the previous bullish swing high around 160. Yet the structure is beginning to look like a bottoming pattern and there is the formation of an Inverted Head and shoulder pattern that may trigger a long rally. This is simply a bearish trendline starting from the September swing lower, but the slope of the trend is key here.
It is less steep than the overall bearish trend starting at 800. If Ethereum can push through this resistance including the 175 support now resistance level, we could see a move to the 370.0 before a significant pullback ensues.
Like Litecoin it has a lot of work to do, as the 38.2% retracement of the overall bearish swing is around 600.00. One question we will ask Steven Lubka in the studio tomorrow is the fundamentals behind many coins, and more about sharding.
There is nothing to like about BCH right now even though percentage wise it outperformed Ethereum during this initial swing. As good as that may be I do not like Ethereum particularly here either.
Having trouble pushing through the previous consolidation is not a good sign and if it takes out the 118 level we could see a retest of the 80 area. Of course it did rally 300% off its low initially but has given nearly 80% of that back. Overall the return on BCH off the low has been more than Ethereum which does place it in a more favorable position, but neither is performing or looks as good Litecoin.
Satoshi or Craigh Wright’s version of Bitcoin looks like it may be a complete flop. Even if it rises due to the tide in the harbor raising all boats, the chart looks weak. Once these become available as more exchanges distribute the coin, the price is likely to move lower. I just do not see a future in BCHSV and we will be unloading our coins as Coinbase adds BCHSV to their platform.
One challenge with many new fiat type currencies is they are competing with others, like Litecoin, that already have market penetration and First Mover Advantage. The drama and battle between Craig and Roger may have been the beginning of the end for both coins.
If there was hope for one it would be Roger’s version, but I am doubtful at this time and would not be adding to my current position.
One of the charts I use often is an overlay of the instruments I am looking to trade or invest into. The current chart of 17 major coins via market cap is indicative of leaders and laggards.
Tron still is dominating the top spot since its buyout of BitTorrent. I still do not see the added 600 million in market cap as a ration value, when the purchase of BitTorrent was a little over 330 million. However it is not my opinion that matters, only the market.
Tron is not an instrument for swing trading we would ever consider. However for those who believe in Tron in the long term, the setup here is quite nice for a position trade. The chart is stronger than most and its performance over the past couple of months can not be ignored.
This is one of those coins where you want to remove your money when you can not when you have to. There is much competition in the dApp space and in my opinion Elastos is still the clear leader. Regardless we have Steven Lubka on the show tomorrow and this will surely be one of the projects we ask him about.
Crypto purist still hate on XRP and regardless of the hate this coin receives, and whether it is valid or not, is insignificant. We base our positions on what the market likes, not what we favor. This does not imply you shouldn’t invest in things you use, you should, but outside a handful of tokens, few have a history of real world use cases. XRP is one of them. You can even transfer XRP to MyFxChoice and use it for trading Forex and CFD’s. As menial as it may sound, it is a real world case.
The daily chart is nothing to brag about and one could say the other coins mentioned above are showing more strength. In the short term this would be true, as it looks to reverse off a double bottom formation. Yet the broader term picture paints quite differently.
The weekly really puts XRP into perspective as it has held the 2018 August low which not even Bitcoin could do during the December selloff. In fairness Tron has outperformed XRP over multiple time frames, but this has much to do with it tripling off its low. Other than the last month, where there is still much positive sentiment with TRX, XRP has been dominate.
The two spinning tops is often an indication of a reversal, especially out of an extreme low, and in a broader time frame like the weekly. I like XRP here and would be open to adding a position.
BAT was one of our recent inventories adds even though it pushed through the 0.107 level which we consider within the tolerance of a double bottom. In short, we can round that to 10 cents. It is attempting to push through multiple overlapping resistance levels including the broader bearish trend line which was rejected only a few minutes ago.
Though it is not readily apparent there is a Inverse Head and Shoulders formation here and a push through the 0.133 level may spark a rally towards 0.152. We are holding out for a broader move here and will update in our premium members area.
Like XRP, BAT has shown resilience over the broader term going back to the low of 15 cents in March of 2018. There are several broader resistance levels to push through starting with the 0.185 level. We are looking for a broader move to retest the 0.35 level and taking out the previous weekly candle is a good start.
We also have a reversal pattern here with the engulfing candle at a level, providing more significance than a random pattern. Since BAT is the utility token for the Brave Browser we want to see continued growth in use of Brave. Last year the had growth of over 500% YoY and over 10 million downloads on Android . As of January there was a 700% increase in verified publisher growth including YouTube and Twitch steamers.
One of the more interesting developments was the default browser on the HTC Exodus will be Brave. The HTC Exodus will be the first native blockchain phone dedicated to dApps giving BAT a huge FMA in the space.
This is one of those that is actually showing real world use in a realm of roadmaps to unicorn valley. We will be looking to add to our portfolio moving forward.
I will never forget one of our followers who is a code writer telling me to buy EOS at 50 cents back in late 2017. Unfortunately I did not and unlike many coin investments, it would still be in the green and way in the green. Ethereum was 300 at that time and Litecoin was trading above 50. Regardless hindsight is hindsight, and like most other coins is appearing to recover from the selloff.
The chart here is interesting with a blow off top back in April of 2018 reaching a high of 22.0. Very few coins held their broader support range, yet it is appearing as if there is a bottom structure in place. If EOS can push through the 3.25 level I would be interested in a position trade here.
In the mid term, if the rally proves to be real, the 5.00 area would be an area to trim out some inventory if one had added from lower prices. We do not swing trade coins with such low price points due to noise but there is a potential position trade we are interested in.
For our swing traders with a little more appetite for aggression I will post a swing trade here. To be clear we will not be taking this trade, but some have the risk appetite similar to the Litecoin trade we posted last week.
After having one of the best looking charts during the correction, Lumens appears to lack any signs of a reversal. This has been a coin that is clearly out of favor with market participants. It is unclear why it would be out of favor as Grayscale Investments recently launched their Stellar Lumens Trust.
Regardless of the news, the price action surrounding XLM has been bitter news to investors. Though we added recently we are putting future positions on hold until further notice. The break of 10 cents was not good and if it fails to mount a rally with the space in general, it may signal something more fundamental is at play with the platform.
As well as it has performed throughout the correction, markets are a “what have you done recently” space and XLM has not done anything impressive here. We will monitor and may adjust our portfolio accordingly, but we do not want to make rash decisions. XLM is still trading near a support zone going back to 2017 and we will see how it plays out over the next week or so.
If I had to choose today between XRP and XLM it would be XRP.
Monero has a not so obvious broader 5 wave move to the downside and is attempting to form a bottom. Again if the market rallies as a whole Monero should benefit as well. Yet after failing to hold the 100 level, the fall has been harder than most. The 60.0 area is an important area to push through and until it pushes through this area we are not interested in adding.
On a positive note it took out the previous weeks high, but that is really the only thing going for it from a technical perspective. Other than this it looks like crap and is in the penalty box until it shows some strength.
XMR USD Daily:
The daily is not much better though it did break out of the consolidation channel and is pushing the 50.0 pscyological level which overlaps with the 50% retracement and the 61.8% extension. Shortly above that there is a target of 60.0 where we would be interested in a swing or position trade on a reversal and signal. Until this time it remains in the penalty box.
To be honest it appears that the only reason XMR is rallying is due to the broader market move. Unlike Litecoin, there was really no pattern that was a clear long signal, other than it did hold the 43.0 consolidation channel for the most part.
Even though I have a position in Monero, I do not like the reaction it is having here. I will just hold the inventory I have and see how the market plays out here.
A new coin that has caught our attention is Santiment ticker SAN. This is a token that is used to gain access to their sentiment platform which is used by traders to track sentiment filtering out the fake news, or the common pump and dump. Really do not know much about this other than the chart looks great which is the reason it made our list here.
It has taken out the previous December high and is pushing towards the 0.57 level which is major resistance. In the broader term the next resistance level is found at 0.90 where if we were holders would be looking to trim out.
In the shorter term the chart looks equally as good. The rally started in late January and we have a consolidation pattern that may lead to a breakout where we have an initial 0.58 target level. The high end target is found at 0.70, so for shorter term traders that appeal to these less expensive coins, here is a potential trade setup. We will post a swing trade in our expert swing chat room as it does not meet our criteria for trading and is not available to US traders.
Since we have not done a thorough review of the coin fundamentals it is not clear the validity of the platform. Yet fundamentals are not needed for trading which are purely technically driven. In short those with a more risk appetite may look at Santiment as a shorter term position or potential swing trade.
Dash as well is showing signs of an initial recovery yet has some work to do here. Until many of these coins start taking out their broader bearish trend we have to remain cautious and Dash is one of those coins. Yet the pullback has fallen within the 4th wave of the 2017 rally which is typical for corrections. It has also taken out the weekly high but other than this that is about it. If a rally does ensue the 140 level is an area of major resistance, and those adding at lower prices may want to take some profits here.
The chart looks very similar to Monero so we put it in the same camp. We still have some inventory here and will be looking to make some portfolio changes with Dash as one of our potential cuts. Dash clearly was not showing any bullish reversal signs prior to the rally and is likely a tide raises all boat move. Initial resistance is found at the 80.0 area which may form a range for Dash in the near term.
As far as swing trading there is nothing here that would have us taking a long trade. There is simply nothing enticing about this chart, nor the longer term chart either. This may come down between Dash and Monero.
NEO is showing some signs of recovery and is pushing through the initial bearish trend channel. This is one of the coins we closed our position in and may look to re-enter in the near term. The 10.25 area forms initial resistance and we would wait to add once this initial resistance level is broken. It is still early in the recovery and though we may not see the 7.0 area again, we would rather side with caution than impulse. Regardless we likely see some sort of pullback off 10.0 where we can look to add back our inventory if we decide to do such. There are other coins I personally like better at this point, so we will see how the market reacts.
Regardless this has the potential for a position trade out of the 10.0 resistance level.
The daily provides some further insight as to why we are cautious to add here. The 8.60 level is another significant level to push through and we want to see it take out at least the “B” leg before entering a position here. This would still be an aggressive position trade, which is why we would rather wait to we see the 10.0 area tested, and a pullback which will provide better insight to the structure of the recovery and further evidence the rally is following through.
There is some evidence of a bottoming structure here though the December rally fell short of the mid term resistance area around 2.0. If OmiseGo is one of those coins you believe will survive and gain market acceptance, it is at an extreme low and throwing a couple bucks at it here would not be unwarranted. However I am not in OmiseGo camp anymore to be transparent. I personally think there are other coins that are targeting the same market and have first mover advantage like XLM or XRP.
Regardless I my personal biased, if I like OMG for the long term, I would be looking to add here. This is nothing more than a contrarian trade where it is so cheap and has been so beaten up I would take an opportunity to add at these low prices. Keep in mind it can go lower, so do not underestimate coins and stocks get cheap for a reason.
Often it is difficult to see what separates a chart we like from a chart we do not. Why we do not like Monero here, yet looking at OMG it there is a potential for a broader swing. There are a couple things I like about OMG here and the first is it took out the previous consolidation area, and is pushing up and into the next. If it can break through the 1.40 level we would look for a broader target of 2.0 which is initial resistance in the mid term. Unlike some other coins there is a reversal pattern here, and it was actually quite strong.
If OMG can push up to the 1.70 area I may consider a position trade after a pullback and broader reversal signal. This would be a pure position trade, as I mentioned I personally think this is a more risky investment than others. However adding free coins out of a position trade is not a bad method in building up a small position and we will look to do that, however, adding fresh capital to OMG is not on our radar.
It has been a difficult and often discouraging market to follow the past year, however the space is starting to show signs of recovery. This is where we can become more aggressive with our portfolio, and will make some changes based on the market reaction over the next couple weeks. We can also look to be more aggressive with our swing trades here. Often traders and investors are discouraged during long periods of bearish or range bound markets. They simply throw in the towel as they were hoping for some great returns during a time when the market is out of favor.
We mentioned often that our goal during this period was to preserve capital and not trade just to be in the game. I can tell you with confidence that many who were trading during the last year are now down another 50% or more with their trading capital. These traders are now working out of the hole, which puts them in a situation where they have to double their money or more, just to get back to even. We follow trading blogs, and other traders, and to see some have 10-15-20 stop outs in a week is just silly.
If you are serious about trading and investing you have to ask yourself whether you are here to make money in the long term, or just trade to be in the game. This is no different than playing poker where you often go hours without playing a single hand. Many get bored and start forcing crappy hands eroding their stack and when they finally start getting cards, are playing with a reduced stack. Nothing like finally getting aces heads up all in and you have less than half the stack you started with. Finally it hits, and you can not take advantage of the opportunity.
We have been conservative with our trades over the past year and that has put us in a situation to move forward, not try and recover from the past. For many this is the first time they were involved in a market that corrected. Many have thrown in the towel, however for those that had the stamina, and persistence to grind through the rough times, you are now in a position to take advantage of a bull market. We are still not overly bullish but the move this past week was a good start!