Market Outlook #100 (9th November 2020)
Hello, and welcome to the free edition of the 100th Market Outlook.
In these free versions of the Outlook, I provide my analysis on Bitcoin and Ethereum.
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Market Cap: $282.807bn
Thoughts: Following the preceding week’s push into the all-time high monthly close at ~$13,900, Bitcoin rocketed higher this past week.
If we look at the weekly chart, we can see that the preceding week closed almost precisely at that all-important resistance on decent volume, with this past week then closing over $1500 above resistance on ever greater volume. If that doesn’t indicate where the mid-term trajectory points for BTC, I don’t know what else possibly could. Price is now trading at levels that have only been traded for a brief number of weeks in Bitcoin’s lifetime. Looking above, as mentioned last week, the main resistance between here and the all-time high is that $17,150 swing-high, but I would not get too excited about an all-time high retest just yet.
In fact, if we drop into the daily chart, here we can see signs that Bitcoin is a bit over-extended following its $2500 rally from the $12500 breakout… not particularly surprising given that rally, of course. Following the push into a new 2020 high at $15,978, price dropped off hard and found support at $14,300, before rallying again to retest the high today; at a glance, it appears to be rejecting another ascent at present and my eyes are on that $14,300 low. It is very much possible that we see price now form a new range between $14,300 and $16,000 for a while before the next leg begins, but, I would be surprised to see that wick hold at $14,300. We know that one of the most important levels in the history of Bitcoin is below that at $13,860, thus it would make sense if we saw a more protracted sell-off into that level to sweep the wick. Some of my bids will be placed in that area expecting a bounce, but – and this is important – I imagine many, many others are expecting the same. If we are all expecting a level to hold given its historical significance, it would be very Bitcoin to overshoot the level. If it overshoots, what is the next area of interest? Well, clearly that $12,500 resistance that never got retested as support. This would barely be 22% off the $16k high, and we know that in bull markets BTC can correct as far as 35-40% before beginning its next leg higher, so that’s something to be wary of. Either way, this is 100% dip buying territory for me, and, with the previous macro swing-low at $9,800, there is plenty of room below for price to form a new higher-low.
Now, there is also the possibility that we see a very short period of consolidation and no real dip before another leg higher, which may well be the path of maximum pain for both bears and those that are on the sidelines. If we do see price break higher than $16k over the next week or two, I think the rally will only accelerate as we approach the all-time high, potentially culminating in a blow-off top above $20k before any meaningful dip is found. In such a scenario, we may well find ourselves pushing for $20,000 before year-end, which sounds unlikely when said aloud and yet would certainly cause a great deal of pain. Exciting times ahead, no doubt.
Price: $447.97 (0.02917 BTC)
Market Cap: $50.779bn (3,307,570 BTC)
Thoughts: Ethereum is finally showing the signs of reversal that I have been eagerly anticipating; signs that may well make it the market leader once more in due course.
Beginning with ETH/USD, from the weekly we can see that price has indeed formed a rounded bottom above the 200-week moving average, with last week’s candle closing at the highest price this year and engulfing the previous week of consolidation. This is very bullish for the pair but it remains below the 2020 high at $491 because ETH/BTC has been under-performing for some time now. Nonetheless, last week’s volume was also significant, trading the highest volume since the week the 2020 high was formed. If we drop into the daily, we also finally have confirmation of a reversal to bullish market structure following the higher low above $365 last week followed by the rally into resistance at $448. For me, as long as price now holds that $365 area, it is unlikely we see the range low at $308 tested again, with price more likely to push for new yearly highs now that ETH/BTC is playing ball.
Turning to ETH/BTC, as expected, the dump took price as low as 0.0263; an area of prior resistance turned support, which has confluence with trendline support throughout this year. Last week saw the pair drop into this level and ultimately close as a bullish hammer on significant volume, with price closing back above 0.0286 – the prior higher-high from February this year. Looking at the daily, the reaction at that confluence of supports ~0.0263 reveals a lot, with price closing the daily back above both 0.0286 and the 200dMA the subsequent day to the low forming. Since, price has held above and consolidated, being capped by trendline resistance from the 2020 high. Now, I am considering two bullish scenarios here for the pair, though I expect one is more likely than the other. The likely scenario for me is that this low at 0.0263 holds firm, with price now forming a higher low followed by a trendline breakout and continuation higher into 2021. The less likely scenario is that we see the pair drop off from here back towards 0.0263, potentially break lower to trap early buyers and trendline longs and print bullish divergence on a new low and ultimately a reversal from there. This would be more plausible if the reaction had not been so strong at 0.0263, in my opinion. Nonetheless, I do think we have seen the worst now for ETH/BTC even if we sweep that low, as I fully expect the 360dMA to hold firm. I am looking for a move towards 0.042 going into the New Year.
And that concludes this week’s free Market Outlook.
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