Market Outlook #20

Market Outlook #20

Market Outlook #20 (27th January 2019)

Welcome to the 20th Market Outlook. That’s somewhat of a milestone, is it not? And what does the past week of price-action present us by way of celebration? In short, f all.

Whilst not technically true, we have just witnessed another week of consolidation amongst Bitcoin, Ethereum and Monero, and price-action at present is extremely choppy on the lower timeframes. We are mostly still range-bound, but the consolidation in Bitcoin is proving to be of service to the rest of the market, with many alts either beginning to pop or looking as though they are on the precipice.

In today’s Market Outlook, I will take a granular look at the market structure in Bitcoin, in an attempt to show just how choppy and uncertain it is currently, and how traders are being destroyed left, right and centre. I’ll then examine Ethereum and Monero, before presenting a couple of opportunities in Komodo and, most interestingly, Golem.

Bitcoin:

Price: $3596

Market Cap: $62.946bn

Thoughts: Bitcoin continues to bounce between lower timeframe levels of support and resistance, effectively range-bound between $3560 and $3750 for the past two weeks (excluding the anomalies; the high at $3886 and the low at $3460).

As such, I figured it would be useful to do a move-by-move study of price-action across this period, observing, in particular, how often (and how mercilessly) price shifts market structure on the 4H:

Towards the end of 2018, we can see a series of higher-lows forming (and with them trendline support). These are met with lower-highs, with the range contracting until the breakout in the first week of January 2019. This high-volume breakout shifted the market structure to bullish from neutral by forming the first higher-high since before the New Year. This then led to another period of consolidation and a contracting range, with price failing to make any new highs above ~$4210.

A lower-high is followed by a lower-low and another lower-high, leading to another break in market structure on the 10th January; this time turning it bearish. This was also the moment price broke the trendline support that had been in play since around Christmas.

This led to a dramatic dump, and a series of lower-highs and lower-lows, typical of bearish market structure. We then see price surge up on the 14th January and form a higher-high, once again shifting market structure to bullish. This is followed by a few days of chop and consolidation, before a higher-high is made at $3886 on the 19th. One could be forgiven for expecting this new high to be met with a higher-low, as is typical of bullish market structure, but once again expectations were demolished and price broke below the previous low at ~$3650; market structure was once again bearish.

This shift brought with it the low at ~$3450 this past week, which has been followed by another period of consolidation. This was the case until yesterday, when price broke above $3650 once again, reclaiming the lost level and turning market structure bullish with a higher-high at $3750. Price has since formed a higher-low (which I have mistakenly marked a lower-low on the chart) at $3600. Will this be met with a new high or another change in market structure, back to bearish?

In truth, I cannot possibly say. The declining volume on the recent retrace back into the range suggests we may get another leg up, but given all that I have outlined above, this is no certainty. The most risk-averse way to play this would be to wait until the market shows you the direction it wants; this will come either in the form of a higher-high, after which it would be logical to expect the highs at $4200 to be targeted; or in the form of a clean break below $3550, ideally with a higher timeframe close below this level, indicating further downside to be found and a good area for shorts to enter.


Ethereum:

ETH/USD

ETH/BTC

Price: $116.07 (0.03227 BTC)

Market Cap: $12.126bn (3,375,084 BTC)

Thoughts: Much like Bitcoin, Ethereum is yet undecided on a clear direction. Against the Dollar, it is clearly range-bound between $116-$120, failing to close above or below these levels on the 4H or 1H over the past week.

Sometimes it is useful, even in tight periods of consolidation, to remind ourselves of the higher timeframe view. As such, ETH/BTC on the Daily shows us that we have bled below the Daily Breaker, just about, but that we are still well within the Daily Bullish Orderblock, with key support resting at 0.0313 BTC. The 4H shows us the gradual downtrend of the past two weeks that has led us to this point.

I have illustrated the two moves I am waiting for before taking any trade on ETH. The bullish scenario would be a clean and strong breakout above this 4H downtrend, ideally on significant volume, at which point I would go long on a retrace with my sight set on 0.042 BTC being taken out. The bearish scenario would be for price to break below this current channel, forming a higher timeframe close below the key support at 0.0313 BTC. This would turn the Daily to bearish, and shorts could be found on a retest of this prior support, which would be expected to hold as resistance.


Monero:

XMR/BTC

Price: $45.84 (0.01274 BTC)

Market Cap: $767.835mn (213,410 BTC)

Thoughts: Monero remains less decisive than even Bitcoin or Ethereum, slowly trending upwards but doing little to comba tthe trendline support turned resistance that has been in play since mid-December 2018.

A clean breakout above trendline resistance and above 0.0137 BTC would turn market structure bullish, and I’d be buying; a strong rejection from trendline resistance and a subsequent clean break below 0.0122 BTC and I would be selling what I currently hold.


Komodo:

KMD/BTC

Price: $0.685 (19074 satoshis)

Market Cap: $76.45mn (21,281 BTC)

Thoughts: Komodo looks very much ready for a move above range resistance at ~22k satoshis. It has been denied a higher timeframe close above this level for the past 5 months almost, trading between it and range support at 15.5k satoshis. During that period, Komodo has experienced high volume on buyups, followed by low volume retracements back to range support. More recently, however, price broke above its 200-day moving average on significant volume, being restrained only by range resistance. Price subsequently retraced on declining volume back to the 200 MA, holding firm around this level; now looking to make another attempt at a breakout from the range.


Golem:

GNT/BTC

Price: $0.065 (1820 satoshis)

Market Cap: $63.020mn (17,541 BTC)

Thoughts: I have no idea how it has taken until the last week of January for me to take a look at Golem, but the past 8 weeks have seen it experience insane volume. Price set a high just shy of 3000 satoshis at the beginning of December 2018, during which period 74% of Golem’s circulating supply was traded across all exchanges. This was followed by a move lower and the formation of a range between 1700-1900 satoshis for over a month. This range remains in play, and, during this period, Golem has experienced cumulative volume of over 317% of its circulating supply. If that isn’t a sign of serious interest at current prices, I have no idea what is. I will certainly be buying in this range.

That concludes the 20th Market Outlook. I hope you’ve found it somewhat useful! Feel free to leave any comments or questions below and I’ll get back to you.


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This Post Has 5 Comments

  1. Hey Nik

    Great write up as always.

    I just wondered how you approach stop-losses on a trade like GNT where it’s so close to ATLs and if it drops, it’s into price discovery territory?

    1. Cheers.

      So, it largely depends on the market cap of the coin. For lowcaps/microcaps, I don’t usually have stop-losses but rather use fixed risk on each position (a predetermined allocation of capital). As for something like GNT, I haven’t yet entered a position, as it dropped below the range shortly after me posting the Market Outlook. I’m waiting to see whether we get a couple of higher timeframe closes below the channel or whether we reclaim it. Had I entered however, I’d have a soft stop-loss 10% below the level of support marked out (in this case the 1700 range support) – if price closed on the Daily/Weekly below this, I’d exit my position.

      1. Understood, thanks for the response Nik 🙂

  2. Hi Nik, I am from Mexico, I started to read your book “an altcoin trader handbook” on Kindle and I conclude its a great book for the beginners (like me) in this space , I also started to study for some charts patterns, and Digibyte $DGB is interesting to me,forming some fractals that are awesome, can you give your opinion about the this coin please.

    Regards

    1. Glad you enjoyed the book.

      DGB looks like it is just about holding above support at 230 sats. If this level breaks, I’d expect it to reach for 160 sats, which is a level of prior resistance.

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