Market Outlook #30

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Market Outlook #30 (7th April 2019)

Hello, and welcome to the 30th Market Outlook. It’s been a very busy week in and out of the markets, with the primary talking point naturally being the 23% upwards breakout in Bitcoin in the early part of the week. We shall, of course, be covering that in great depth, but there’s plenty else to discuss…

In this week’s post, I’ll be looking at the past week’s price-action in Bitcoin, Ethereum and Monero, plus providing an update on Komodo.

Let’s crack on:

Bitcoin:

Price: $5160

Market Cap: $90.99bn

Thoughts: So, it seems Bitcoin decided to ignore the expectations I put forth in last week’s post of a gentle, sustained rise over the course of the week, and instead went for the explosive breakout. In the space of about two hours at the beginning of the week, price moved from ~$4100 to ~$5100; a near-25% jump. Volatility of this kind has not been seen for months, and bullish momentum to this degree has not been seen for over a year.

Looking at the first Weekly chart provided, it seems to be the case that Bitcoin is indeed playing out a similar (but not identical) price fractal to the bear market of 2014/15. The tightening of the gap between the 20-week moving average and the 200-week moving average led to an upside breakout from trendline resistance back in 2015, just as it did this past week. This breakout led price towards a level of support turned resistance at around $320 in the summer of 2015, initially followed by a rejection and retest of the 200-week moving average.

Now, if something to that effect was to play out, we should see price reach for just shy of $6000, reject hard and retest the Weekly 200MA at around $3500 over the next few months. This would provide strong support, allowing for a bullish continuation and a break back above the key $6000 area towards the end of the year. Whilst I do not expect price-action to be quite so tidy, I do believe this will be the general direction of the market for the remainder of the year.

Looking now at the second Weekly chart provided, we can see a clear and strong breakout from January 2018’s trendline resistance on significant volume, indicating to me that the cyclical low is indeed in. I have gone out on a limb in previous posts and mentioned that I believed we had found the cyclical low above $3000, but, to me, this confirms that theory. Further, we have also broken out above range resistance that has been in play since November 2018.

Finally, looking at the Daily chart, we can also observe that price has closed above the 200-day moving average (often a reliable proxy for relative bullishness or bearishness), but that there is much to be wary of in the short-term. There is now significant overhead resistance between $5500-6000 and RSI is the highest it has been on the Daily timeframe since the beginning of the bear market in January 2018; now, indicators are by no-means a be-all, end-all, and I do not value them above price-action or volume itself, but there is enough indication here across all possible analytical perspectives that Bitcoin needs a bit of a breather.

In truth, I do not expect the first dip to be of any significance, unlike those that believe we retrace the majority of this entire past week’s movement – instead, I see price dipping towards $4800, before making a move up to test that heavy overhead resistance zone. It is from this area that I think we see the hard rejection that leads to a move back towards $4400 and likely below that. However, this is a scenario that I believe will play out over the course of the next couple of months rather than next week.

Next week, I think we see some more consolidation between $4800-5300 – but we still have tonight’s Weekly close to concern ourselves with…


Ethereum:

ETH/USD

ETH/BTC

Price: $168.11 (0.03271 BTC)

Market Cap: $17.745bn (3,444,267 BTC)

Thoughts: Ethereum is in a very interesting place at the moment, given the dump that occurred in ETH/BTC courtesy of Bitcoin’s movements over the past week. Firstly, looking at the ETH/USD Weekly chart, we can see that price is still being capped by trendline resistance from January 2018, unlike with Bitcoin, but also that price looks to be ready to close strongly above the 20-week moving average for the first time since the bear market began. Price also remains capped by support turned resistance at ~$170.

The first Daily chart I’ve provided shows the relationship between the 20-day and 200-day moving averages on ETH/USD throughout its price-history, and we can clearly see that Ethereum’s bull market began when the former crossed the latter in February 2017. Looking now at the recent price-action, we can see the same cross inching closer to occurring. Price did consolidate for a good week or two before taking another leg up after this cross took place in early 2017, so perhaps we shall see some consolidation over the next week also.

The second Daily chart gives us a much closer view of recent movements, with a clear rejection from closing below the 200MA but a lack of willingness to close above trendline resistance or horizontal resistance; again, much like Bitcoin, this is an area with a lot of overhead resistance.

Looking at the ETH/BTC chart, we can get a clearer idea as to what Ethereum can be expected to do next. Price is currently in a contentious area, struggling to spend much time above or below the trendline resistance. This past week took price below the 200-day moving average for the first time since February, but only briefly, with price now trailing it almost to the satoshi. The uptrend from December has been lost on significant volume, which is not a particularly good sign, and yet the explanation of such a move is simple; the unanticipated short-term volatility that occurred in Bitcoin. I expect that the level I have marked ‘critical support’ at 0.0298 BTC will hold, with price consolidation whilst Bitcoin figures out its next move, followed by a continuation of bullish momentum; in fact, this, for now, is simply a higher swing-low.


Monero:

XMR/BTC

Price: $69.75 (0.01352 BTC)

Market Cap: $1.179bn (228,505 BTC)

Thoughts: Unbelievable… I finally have something to say about Monero after 106 days of range-bound price-action. This past week saw the range broken to the upside on significant volume, with the 200-day moving average providing resistance. Following this, price rejected hard and dumped back into the range, all the while remaining above short-term support at 0.0128 BTC. Now, it seems as though Monero wants to escape the range once again, but I expect some more consolidation around range resistance at 0.0136 BTC before the 200-day MA is tackled again.


Komodo:

KMD/BTC

Price: $1.23 (23,878 satoshis)

Market Cap: $138.509mn (26,867 BTC)

Thoughts: Much like the rest of the entire market, it is clear that the Bitcoin volatility was unexpected for Komodo holders, and many jumped to sell their coins for whatever reasons they believed made sense in their own heads…

Clearly, large holders (or so-called smart money) did no such thing, as the volume on the dump is barely visible on the chart, and price remains above the range breakout level at 22500 satoshis. I expect perhaps some more dumping by weak hands if Bitcoin does make another 5-10% move upwards next week, but that the uptrend will remain intact and that any move below 22500 satoshis will be shortlived. Over the coming weeks and months, the direction seems clear to me.

And that concludes this week’s Market Outlook. I hope you’ve enjoyed the read.

As always, feel free to leave any comments or questions below!


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