Market Outlook #205 (23rd January 2023)
Hello, and welcome to the 205th instalment of my Market Outlook.
In this week’s post, I will be covering Bitcoin, Ethereum, Polkadot, The Sandbox, Fantom, Frax Share, 1inch Network and Merit Circle.
As ever, if you have any requests for next week’s Outlook, do let me know.
I’m also just finishing up the special post on my ten favourite picks, so expect that over the next day or two.
Market Cap: $439.192bn
Thoughts: If we begin by looking at BTC/USD on the weekly timeframe, we can see that price continued to rally last week, pushing off the weekly open all the way into the close marginally above trendline resistance from the all-time high, albeit on slightly less volume than the previous week. Nonetheless, this is really promising given the amount of overhead resistance price was facing last week; moreover, following this weekly close, BTC now has bullish market structure with the higher high above the prior swing-high at $21.5k. Momentum is pointing higher for the coming weeks and with this trendline breakout I think it is likely we continue to see more BTC strength in Q1. However, it is likely time for a breather very soon…
If we drop into the daily, we can see that despite the marginal breakout on the weekly, price is basically just consolidating at trendline resistance and just above prior resistance around $22.4k. Momentum is starting to top out and diverge alongside falling volume, and I would not be surprised to see price sweep $23.4k and then reject and break lower. Given the extent of the rally since the year began, I think we are due a pullback, and whether it is a deeper pullback or a shallow one I don’t know; what I do know is that if we do reject in this region and push back below the trendline and below $22k, I am looking at the swing-low that preceded this push higher around $20.4k as a prime target, as that is where a lot of people with open longs will likely have stops placed. If we do dip back below $20.4k and catch a bid around the 200dMA at $19.8k, I think it’s possible we put a low in there and take another stab at a push towards $24.6k. If $19.8k fails to hold on a pullback, I am looking at the chunky reclaimed support zone between $17.5k and $18.2k as a blind bid zone for spot. I expect upside to be capped around that $24.6k area on the first attempt given it is also where the 200wMA is sat; once we’re back above that level and holding it as support, the worst is likely well behind us and we’re on course to tackle $30k.
Price: $1,623 (0.07125 BTC)
Market Cap: $198.717bn
Thoughts: Beginning with ETH/USD, we can see from the weekly that price closed just below resistance around $1660 last week, also marginally shy of the major pivot around $1730. This is a key area of resistance for ETH to overcome and, much like $25k for BTC/USD, I do not expect it to give way on the first attempt, particularly with trendline resistance also sat just above it. Rather, if BTC begins to pull back here, I expect ETH/USD to retrace through last week’s low at $1510 back into the 200wMA and the trendline resistance breakout zone around $1400 (which also happens to be prior cycle highs). Anywhere in that region is likely good for increasing long exposure in anticipation of a move through $1730 over the coming weeks towards $2035. If, however, the 200wMA does not hold on a pullback, I would be looking to cut any exposure quickly, as we may well come back into the $1215 area to retest as support. I am still also very wary of the fact that we have clean lows at $1000 and $1073, but if BTC is leading the charge forward I very much doubt we retrace that far on ETH/USD just to take the lows. This would only become probable now if the move in BTC/USD begins to look more like a bull trap than emergence from a bottom.
Turning to ETH/BTC, last week saw a marginal retracement back towards the mid-range, but very little if anything has actually changed. We are still sat above 0.069 as major support and below 0.078 as resistance and the pair just continues to chop between those two levels. Until we see either side of the range closed beyond, there is nothing more to discuss for the pair.
Price: $6.36 (27,900 satoshis)
Market Cap: $7.374bn
Thoughts: Beginning with the weekly chart for DOT/USD, we can see that price has broken out of the downtrend from the all-time high since putting in a low at $4.21, now rallying back into support turned resistance around $6.40, where it has been sat for a couple of weeks. There is another level of key resistance just overhead at $6.90, which I expect to cap the rally on the first attempt. If we do break and close through that level, I am looking for longs all the way into $10. However, if we do reject below that, which I expect is the more probable scenario, there is a strong case to catch a bid at $5.06-5.34 – the two levels of reclaimed support following the breakout. Any move into that zone looks good for a higher-low formation and then continuation higher. Dropping into the daily, we are also sitting right up against the 200dMA here with diverging momentum into resistance, making the case for a pull-back in the next week or so even stronger. I want to see the $5.60 swing-low taken out into demand and then jump in.
Turning to DOT/BTC, we have been supported by the 27k satoshi floor since May last year, with price recently dipping below but immediately reclaiming the level. As long as support between 25.3k and 27k satoshis does not fail, I think this is very likely the cyclical bottom area for DOT/BTC, from which we are to emerge into a new cycle. Confirmation of this for me would be if we now turn weekly structure bullish by closing back above 31.7k satoshis and then forming a higher low above the support base. Looking at the daily, the 31.7k area is also where the 200dMA is sat, which has capped price on the previous three attempts to move beyond it, so getting firmly through this looks like a huge shift in momentum for me. Keeping a close eye on this one.
Price: $0.80 (3483 satoshis)
Market Cap: $1.203bn
Thoughts: If we look at SAND/USD on the weekly timeframe firstly, we can see a very similar setup to DOT, having broken out beyond trendline resistance that has capped price since the all-time high in November 2021, following a low forming at a 95.5% drawdown from that high in late December around $0.39. Price has now reclaimed a couple of support levels and firmly closed above that trendline, with the pair now consolidation below key reclaimed resistance at $0.90. If this level holds as resistance for the time being, one would expect a pullback into the $0.53 area to follow to form a higher-low. I would be looking to buy anything into the $0.55-0.60 area, as I’d expect the level itself to get from run if there is momentum here to move higher. Once SAND clears $0.90, there is minor resistance beyond that around $1.25, but I expect this to continue a new cycle higher with the first major resistance coming in around $2.60.
Turning to SAND/BTC, we can see that the pair continues to be capped by trendline resistance, but has bounced off prior resistance turned support at 2500 satoshis and rallied into prior support now acting as resistance at 3600 satoshis. Given the overhead resistance in this area, again I think it is likely we see some small pullback to form a higher-low, from which we see SAND tackle the trendline, with a breakout through it opening up almost 100% of upside towards the next major resistance around 6700 satoshis. Lots of potential here…
Price: $0.383 (1678 satoshis)
Market Cap: $1.060bn
Thoughts: Beginning with FTM/USD, we can see that price found support at a higher-low around $0.24 a few weeks ago and has been pushing higher since, confirming weekly bullish structure on the close through $0.29, which is now acting as support. This is the exact structure that I think a couple of the other alts we have mentioned in this Outlook are lagging behind on, for context. That higher-low has catapulted FTM into the 200wMA and prior resistance at $0.43, which has capped price for over 250 days, and I don’t expect this first attempt at a push through it is going to see a breakout, especially if BTC/USD begins to pull back here. As such, I would now be looking at the daily swing-low around $0.29 to get swept, convincing everyone that the run is over as daily structure begins to look bearish off the 200wMA rejection, leading to demand stepping back in around the 200dMA at $0.24 and price breaking through that $0.43 ceiling on the next attempt, with significant upside to follow into $0.58 for the next resistance. We may not even get that $0.24 retracement, but if we do I am looking to add to my spot position. I have exited half of the spot I own here in anticipation of this pullback but will re-add if we close firmly through $0.43.
Turning to FTM/BTC, price has spent months consolidating above the 200wMA and has now pushed off it once again, breaking through prior resistance turned support around 1470 satoshis and now sitting right below major resistance between 1740 and 1880 satoshis. I would expect a retest of the breakout area to follow, leading to a clean break through 1900 satoshis and another leg higher into the untested prior support around 2420 satoshis, where I would look to hedge any exposure and await further clarity. If we look at the daily briefly, we can also see that the 360dMA is sat right at the 1880 level, providing further confluence for resistance here.
Price: $10.04 (44,010 satoshis)
Market Cap: $733.901mn
Thoughts: If we begin by looking at FXS/USD, we can see that the pair appears to have recently emerged from a multi-month accumulation range, with range support holding since June around $4.20 and range resistance at $7.50 being closed through a couple of weeks ago on significant volume. The pair is now sat in no man’s land around $10, with the next resistance up near $13. If we drop into the daily, we can see that we have actually stalled right at the 360dMA and momentum is beginning to drop off here. I would expect to see some sort of pullback from here to within spitting distance of that breakout level to retest it as support, though no doubt we see that front-run if we get anywhere near it with the momentum that this appears to have. If we do get near $8, I will be looking to get involved with invalidation on a weekly close back inside the range and a first target of $13, followed by $17, followed by $28 where I would look to exit most of my position, if filled.
Turning to FXS/BTC, we can see that the pair has been trending higher since June last year and that last week saw price close back above 39k satoshis, potentially reclaiming that as support following the breakout beyond resistance around 35k. Given that 35k satoshis remains untested since the push beyond it, it would align quite nicely for that area to be wicked into whilst the dollar pair drops towards its breakout level too, and that would provide a lot of confluence for a bid. Looking ahead, I think it’s quite obvious where this is likely headed, with zero major resistance all the way into 77k satoshis…
Price: $0.54 (2364 satoshis)
Market Cap: $430.40mn
Thoughts: If we begin by looking at 1INCH/USD, we can see that the pair has retraced 96% from the all-time high at $8.30 in November 2021, putting in a fresh all-time low in December 2022 at $0.365. From there, the pair has rallied in a manner not too dissimilar to the previous ‘bottom’ at $0.52 in June, with price now consolidating around prior support turned resistance at that June level. We are seeing early signs of a push through resistance this week, with the next resistance up near $0.67, and before I get involved here I would like to see price push into that area and then start to form a higher-low above $0.52, where I would look to buy the retest. If we drop into the daily, we can also see that we are now coming into the 200dMA, above which price has not closed since December 2021, so closing firmly through this would be an early sign of changing fortunes.
Turning to 1INCH/BTC, the pair has been capped by trendline resistance since the formation of the all-time high back in February 2021. This trendline as seen numerous false breakouts, with the most recent in December leading to another leg lower and fresh all-time low at 2125 satoshis, above which the pair is currently consolidating. We have now formed a tight range with the all-time low as support and the prior all-time low at 2360 as resistance, with the trendline bearing down upon us. I think the play here is extremely clear: I want to see a weekly close above 2800 satoshis and trendline resistance and then buy the first dip after that with invalidation at fresh new lows, looking to hold for the next cycle…
Price: $0.34 (1488 satoshis)
Market Cap: $116.74mn
Thoughts: As Merit Circle has only been trading since December 2021, both pairs look identical and so I will focus on the Dollar pair here.
So, looking at MC/USD, we can see that it has been in a downtrend its entire price-history, having formed an all-time high around $15 shortly after initial trading began and then retracing 98% since then into an all-time low around $0.25 a couple of weeks ago. Price has rallied off that low into prior support turned resistance at $0.40 and has since formed a higher low above reclaimed support, from which it is now pushing higher once again. I have been buying MC around the $0.30 area and am now going to be adding to my position until I fill 2% position size, as I am just looking to play this moon-or-die from here. At a 98% drawdown with no bull cycle in its history, I am happy to lose that entire 2% if it somehow goes another -98% from here, given the upside is so great. I am happy with a ~$0.30 average for my position and I will be looking to hold this for its first bull cycle, at the very least back towards $2.50 as the original support level from the first day of trading.
And that concludes this week’s Market Outlook.
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