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Market Outlook #45 (14th July 2019)
Welcome to the 45th Market Outlook, and for those of you a little confused about why this Sunday has skipped straight from #43 to #45, that’d be because I published an Altcoin Special last night, which you can find here.
In today’s post, however, I’ll be covering the past week’s price-action in Bitcoin, Ethereum and Monero, as usual, plus provide a long-term perspective on Stratis.
Market Cap: $199.154bn
Thoughts: Bitcoin is beginning to look precarious, with sentiment divided between whether we are to see a deeper retrace before cyclical continuation or whether support will be found above $10,000, below which Bitcoin will never trade again. Let’s take a look at the chart and see what we can make of it…
From the Daily chart, we can see that Bitcoin showed signs of strength when it rallied above the prior swing-high at $12,100, maintaining bullish market structure on this timeframe and looking as though new yearly highs were imminent. However, the rally occurred on significantly less volume than the peak at $13,900, and price rejected new highs hard, falling back to the $11,000 area, where it now sits. Looking at the 200-day and 360-day moving average, we can see that tomorrow is the day they will make a bullish cross, which has historically led to the 200-day moving average supporting price for the duration of the bull market. The most recent trendline support (and steepest curve of the parabolic advance) is looming nearer, and I suspect this parabola shall be broken, leading to consolidation below yearly highs for several weeks at the least.
Looking at the 4H chart, we see a number of things that support this bearish scenario; the most apparent of these being the head-and-shoulders pattern that has formed, with a neckline at the ‘double bottom’ at $10,760. The first point to note about this is that head-and-shoulders patterns have failed to complete numerous times throughout recent months, so I am not putting much weight on this until we see a close below the neckline on significant volume. However, the fact that a double bottom has been printed there leads me to believe that this one may actually play out, as price seeks to trap early longs with stops set below the $10,700 level. An equal move down from the neckline would lead to price below $9,000, which I have been expecting to occur before new yearly highs for some time now. This would also allow for the 200-day moving average and price to move closer to each other, as they are currently significantly detached from one another, as could be seen on the Daily chart; in historical bull cycles, the 200-day MA has traded closely beneath price.
This bearish scenario would be invalidated upon a 4H close above $12,100.
Price: $266.25 (0.02387 BTC)
Market Cap: $28.502bn (2,555,000 BTC)
Thoughts: My expectations of a strong Ethereum on any signs of a local top for Bitcoin did not pan out, as ETH/BTC made new lows this past week beneath the 0.0246 BTC support that had held for some time; however, I did mention in last week’s Market Outlook that there is a possibility that we see a Wyckoffian spring scenario play out, where ETH/BTC moves below 0.0246 BTC, using the dump as a ‘spring’ from which prices sharply reverse back into the range.
Looking at ETH/BTC, we can see that a bullish divergence has been printed on this move below range support, and that the breakdown occurred on significantly lower volume than the previous dump. That said, market structure is clearly bearish and price is clearly trending down right now, and until we see price move above trendline resistance and reclaim 0.0246 BTC, the outlook remains bearish, at least short-term. A bearish continuation with prices suppressed by trendline resistance would see ETH/BTC trading at 0.022 BTC by August. However, if next week sees price reverse sharply, I would consider this the spring.
Looking at ETH/USD, we can see that price is currently trading at resistance turned support of $265, having formed a lower-high this past week at $317, retesting the breakdown from trendline support as resistance. I expect we shall see ETH/USD follow BTC/USD, likely moving back into the old range between $225 and $265, towards the less steep trendline support from December 2018.
Price: $91.77 (0.00828 BTC)
Market Cap: $1.568bn (140,750 BTC)
Thoughts: Monero has had a tough time of it recently, but looks surprisingly decent against the Dollar, currently trading above the 360-day moving average and respecting historical trendline support from 2016, as can be seen on XMR/USD. That said, if Bitcoin is to fall lower and make another move below $10,000, the only way XMR/USD will remain above this trendline support is with some underlying strength in XMR/BTC.
Looking at XMR/BTC, we can see that the picture looks rather bleak right now, with market structure firmly bearish on the Daily timeframe, with old support turning resistance on the way down. Trendline resistance is currently capping price and the next level of support is at 0.006 BTC; ~25% below current prices. I would not be looking to buy Monero until that trendline resistance is turned support on significant volume.
Price: $0.67 (6035 satoshis)
Market Cap: $67.221mn (6,035 BTC)
Thoughts: Stratis is in a precarious position at the moment, as it could be on the verge of a new bull cycle or a tumble towards all-time lows, which are still a way off.
Looking at STRAT/USD, we can see a similar pattern of price-action playing out to that which preceded the 2017-2018 bull cycle, with price contracting within a pennant, experiencing a false breakout to the downside and then reversing sharply back into the pennant before breakout out and beginning its bull run. Currently, price has seen the first two parts of the fractal play out, as Stratis is currently trading beneath the pennant but above range support at $0.52. Price is also being capped by trendline resistance, the steepness of which would see Stratis back below $0.20 by year-end. This is crunch time for the project, and a reversal from current prices is needed in order to prevent a fall back to those early 2017 levels, with little support available in between.
Now, looking at STRAT/BTC, we can see that trendline resistance from the all-time highs in the summer of 2017 is capping price, with its steepness indicating all-time lows below 1400 satoshis in January 2020; effectively, Stratis would be dead, at this point, if the steepness of this decline is to continue. Given the fundamentals, I doubt this will occur, and yet it cannot be disregarded that market structure is firmly bearish, with old support turning into resistance. Price is currently trading at the support that preceded the bull run in Q1 2017; this should really hold, as there are few significant, higher timeframe support levels between here and the all-time low. Those seeking to enter a cyclical position should wait until resistance begins to be flipped as support, thus turning market structure bullish again, prior to buying.
And that concludes this week’s Market Outlook. I hope you’ve found some value in the read.
As ever, feel free to leave any comments or questions below and I’ll get back to you!