Market Outlook #75 (4th May 2020)
Hello subscribers, and welcome to the inaugural premium Market Outlook.
I’d like to thank you all for your support, having recently launched the Premium Content section of my blog. I promise that it will be worth your time and money; I have a lot of great content planned. For now, let’s begin with top-down analyses of Bitcoin and a dozen or so altcoins that are currently on my radar.
In this week’s post, I’ll be covering Bitcoin, Ethereum, XRP, EOS, Tezos, Chainlink, Cosmos, Basic Attention Token, Siacoin, Zilliqa, Constellation and V-ID.
There’s ~50 charts in this post, just to warn you – you may want to grab a coffee or five.
If you have any suggestions for future Market Outlook inclusions, feel free to leave a comment or drop me a message privately or via email.
Market Cap: $162.58bn
Thoughts: Bitcoin is, quite surprisingly, looking as though April never happened. In last week’s Market Outlook, I mentioned that I expected a squeeze further to the upside, perhaps capped around $8700, but over the past week we squeezed even further, touching the lower $9k area before finding any resistance.
Looking at the Weekly chart, we can see a very bullish close from last night, culminating in a strong and clear movement above the high of the capitulation candle from March. Above, we have a clean double-top at $10600 or so, which, to me, now appears prime for a raid before any downside risks become apparent. More importantly, I know many have been monitoring the declining volume on the rise with eager eyes, but this past week put all worries to bed for me regarding the validity of this retracement, as volume traded was the highest since capitulation. Now, that does not mean that my worries are all abated for downside risks, as I do believe the macro conditions are not primed for a longer-term reversal whilst Bitcoin’s fate remains tied to that of equities (in a similar manner to that of Gold during the earliest stages of 2008’s double-dip recession). Looking at this chart for what it is, the path of most pain appears to be a raid of $!0,600, where long-term bears expecting further bloodshed will have stops placed, followed by a swift and violent rejection, leading to a retest of the 2020 open price at $7167 (possibly even lower).
Turning to the Daily, we can see that $9100 is a very important pivot, having acted as resistance and support on multiple occasions prior to some significant moves for almost a year. The loss of $9100 was in fact the final breakdown before capitulation to the mid-$3ks. As such, I am keenly watching price-action in this area for clearer indications. Given how strong last week closed, I am now seriously consider the possibility of a move above $10,600 as the path of maximum pain before any downside, as early shorts continue to get trapped. That said, if we sweep last week’s high at $9470 and break down from there, I would consider the local top to be in (a lower high, to boot) and expect swift downside. I’d be looking to get short a retest of $9080 from below as resistance subsequent to a false break above that high, targeting the breakout level at $7900 first, followed by the yearly open and then the December 2019 range low at $6400 as a final target. What concerns me most for bulls is the lack of stop runs on the way up, leaving several swing-lows untapped with freely available liquidity. As such, I would not be surprised to see Bitcoin sweep $6400 before the real breakout begins, perhaps aligned with a second wave of risk-off across markets. This scenario would be invalidated for me if we closed the Weekly above $10600 on good volume, as that to me would indicate a long-term trend reversal and the continuation of the bull cycle that began when we originally left the $4000 are in early 2019.
Price: $206.20 (0.02326 BTC)
Market Cap: $22.91bn (2,589,645 BTC)
Thoughts: Ethereum has been outperforming Bitcoin since the capitulation of mid-March, as one would rightly expect of a risk-on reversal across markets. This out-performance stalled last week as ETH/BTC failed to continue grinding up alongside BTC/USD, leading to weaker gains for ETH/USD than during previous weeks.
Looking at the Weekly for the dollar pair, we can see a clean SFP of the December 2019 lows at $115 during capitulation, with a failure to move below the Oct/Nov 2018 lows, followed by a swift move back above the capitulation candle high. We have macro range resistance overhead at $367, which was also front-run as we made the 2020 high at $294 before falling off. As such the range continues to tighten, and a lower-high here would not necessitate to me a lower-low to follow, as the failure to close below $115 suggested to me underlying strength from bulls. Couple that with the unprecedented volume during capitulation and I do sincerely believe the $80 low of 2018 will remain intact.
Turning to the Daily, we can see multiple levels being flipped from resistance to support on the rally up since mid-March, including the 2019 open at $156. More importantly, the capitulation candle high at $195 (also triple top resistance from Q4 2019) appears to be holding up as support for now, aligning with the 360-day moving average, indicating some further upside to be had. That said, we are now facing significant overhead resistance at $225, which has been a pivot since late 2018 for price. Above that we have the lower-high at $289 and the 2019 high at $367. If we are able to climb above $228 and close above it, I would expect a retest of $290. If we fail to break cleanly above $228 or break down here, I would short a retest of $195 looking for the yearly open at $156.
Moving on to ETH/BTC, which I believe to be far more important at the moment, the Weekly chart shows the consolidation currently occurring between the two most significant levels on the chart: the pre-2018 cycle low at 0.023 and the double-bottom pre-capitulation in early 2019 at 0.0245. As I have mentioned before, above these levels I am a bull. Moreover, we can quite clearly see a series of higher-highs and higher-lows from September 2019, confirming bullish market structure. That said, the reluctance to break above 0.0263 for 3 consecutive weeks is a worrying sign, but as long as price holds above this area I think we can expect further upside. If we close the Weekly above 0.0287, I would expect a significant reversal in sentiment for alts across-the-board and a move towards 0.042. If we start to move below 0.023, I’d expect a test of the higher-low at 0.02; failure to hold above that would invalidate bullish market structure and open up a move to the lows at 0.016.
Finally, looking at the Daily chart, I have drawn on a parabolic advance that is currently playing out for the pair, though it looks to be faltering here. That said, we do seem to be holding up well above those key levels and the 360 and 200-day moving averages, the confluence of which provides a good area for tight stops on longs. The clean triple-top at 0.026 is also uncharacteristic of a top, and shorts will have stops placed above there.
Price: $0.218 (2467 satoshis)
Market Cap: $9.64bn (1,088,164 BTC)
Thoughts: XRP has come into a very interesting area since the capitulation in March and its ETH pair provides much insight as to potential outperformance.
Beginning with XRP/USD, we can see that the 2017 range low at $0.125 was raided during March capitulation; a level that had remained untouched for several years. This level was reclaimed as support the following week and volume has continued to rise for successive weeks as price has moved back above the low of November 2019 at $0.175. We do now have overhead resistance at $0.245, but if price is able to move above it I would be looking for a retest of the 2017 range high at $0.40. If we look at the Weekly chart since 2018, the entire 30+ months of price-action have been a slow bleed, characteristic of the classic bear cycle into accumulation; i.e depression. Looking at the chart, it does not seem unlikely to me that the March capitulation was the final rug pull before a reversal, particularly when one looks at its other pairs.
If you look at XRP/BTC, the Weekly shows a near-300-day accumulation period above the high of the candle that preceded the final bull run of 2017: 2250 satoshis. This is very significant and provides us with a high risk/reward area for long-term spot longs. I am a buyer below 2500 satoshis, looking to hold for the next cycle, with my stop on a Weekly close below 2250 satoshis. I would not be surprised to see a deep wick below the level to clear out anyone with stops placed on a downside breakout, but I would expect this to be bought up quick if the bullish scenario is valid.
Finally, if we look at XRP/ETH, we can see that the pair traded into the price area that preceded the 300% outperformance of mid-2018, appearing to form a higher-low above 0.001 currently. If the pair is able to close above 0.00139, I would expect a period of prolonged outperformance for XRP.
Price: $2.78 (31,390 satoshis)
Market Cap: $2.56bn (289,525 BTC)
Thoughts: If we begin with EOS/USD on the Weekly timeframe, we can see the most important level; the two-year trendline resistance. This is what capped EOS on its false breakout earlier this year, which preceded capitulation in March. That capitulation incidentally led to a raid of the 2018 low at $1.51, but the fact that EOS failed to close above the November 2019 low at $2.10 is a little concerning for bulls, as it suggests weakness relative to other alts, particularly Ethereum. After all, why buy riskier alts like EOS if Ethereum is expected to outperform? Moreover, the price-action since capitulation has been fairly weak, with a slow, small-ranged grind up and a rejection wick last week below the 2019 open at $2.85. Whilst we remain below the two-year trendline resistance, I expect EOS to underperform.
Turning to the Daily chart, we can clearly see that the 200DMA and the breakdown level prior to capitulation at $3.30 capped price last week, with a swift move back below the 2019 open at $2.85. Price is currently holding above the 2020 open, however, at $2.57, but volume is declining and it seems like the steam is running out a little. That said, I do believe EOS’ fate is tied to that of other alts and Bitcoin (effectively, risk) and so any continuation in the risk rally will lead to more upside for EOS – but, it does not look like a strong performer right now.
Looking at EOS/BTC, we can see that trendline resistance is also capping this pair from early 2018, but price is just about holding above the Q3 2019 lows at 30k satoshis. If I’m honest, this doesn’t look like it is going to hold as a floor, and I am on the sidelines both on leveraged and spot positions for EOS. EOS/ETH is also giving us zero indication (unlike XRP/ETH) of future outperformance, having broken and closed below the significant pivot at 0.015.
Price: $2.82 (31,810 satoshis)
Market Cap: $1.998bn (225,622 BTC)
Thoughts: Tezos looks pretty decent here across its pairs on a longer-term outlook, but last week’s bearish close on its dollar pair should be a little concerning for bulls.
Looking at the Weekly for XTZ/USD, we can see that the high of the opening week of trading at $1.95 back in 2018 became resistance in April 2019, with a breakout finally occurring earlier this year, with the breakout candle leaving somewhat of a clean double bottom at $1.22. This led to a strong push up to new highs at $3.95 in February, but price fell off quick from there, with the March sell-off culminating in a move below the double bottom but a false break. Price then formed an inside week followed by another inside week followed by a third, with the fourth week breaking out to the upside and beginning the sharp reversal back above the old resistance at $1.95.
Turning to the Daily, I have highlighted the two paths that I would want to get involved in if they were to unfold: a long on a clean break above $3.05 looking for new highs, or a short of the retest of the pre-capitulation support at $2.50 following a breakdown from here.
Looking at XTZ/BTC, there is more strength here than in the Dollar pair, as one might expect, with old resistance at 25xxx and 28xxx now acting as support following the brief move below in March. Price is now testing 29.7k satoshis as support, with the all-time high overhead at 40k satoshis. I expect new highs to follow whilst we remain above 28k satoshis.
Price: $3.79 (42,755 satoshis)
Market Cap: $1.325bn (149,643 BTC)
Thoughts: LINK is further along in its market cycle than Tezos but the two share many similarities. My only question now is whether this current range in its USD pair is re-accumulation before new highs or distribution?
Looking at LINK/USD, we can see from the Weekly that a range has formed with the old high at $1.55 as new support since mid 2019, with range resistance at the all-time highs around $5. The first high of $4.88 from June 2019 was swept earlier this year into $5, but from there we fell off to the bottom end of the range, sweeping the $1.55 low into $1.40. Since, we have reversed again, with another test of range resistance well within sights.
Looking at the Daily, we can see all of this range action more clearly between $1.45 and $5, with the recent pivot at $3.40, having acted as resistance and support multiple times since October 2019. Whilst we are above this level, which also acted as support pre-breakdown, I would expect to see bullish continuation; fall below it and I will be getting short.
Turning to LINK/BTC, much like ETH/BTC it has been in a state of parabolic advance (albeit for two years rather than a few months), with each leg of the rally steepening. This parabolic advance has not yet been broken, which is why I think bulls continue to have the upper hand here, despite recent stalling at the highs around 53k satoshis. My plan for LINK/BTC is simple: buy here with a target at new highs and switch short if we close below 37.5k satoshis on the Weekly. The nail in the coffin would be a clean break below 33k satoshis, which would make this entire pattern since the New Year appear to be euphoria into complacency; but that is not what I am expecting whilst we remain above the trendline support.
Price: $2.79 (31,444 satoshis)
Market Cap: $531.17mn (59,961 BTC)
Thoughts: ATOM is in a precarious position – one that does not interest me at all at present.
Looking at ATOM/USD on the Weekly timeframe, we can see that price has been in a downtrend since inception, with the all-time high having formed at $7.77 a few weeks after first listing. Since, price has made a series of lower-lows and lower-highs on this higher timeframe, with the 2019 low at $1.85 having been destroyed during March 2020 capitulation, setting a new all-time low at $1.05. That said, price failed to close below 2019’s low for several weeks, leading to expansion to the upside, back to prior support turned resistance at $3.28, where it rejected last week.
Turning to the Daily for the pair, we can see that price has stalled at the pre-capitulation support and 50% retracement, though it is holding above the double top and prior support around $2.60. If I’m honest, nothing about this looks clear to me until we move above $3.27, following which I would get long for further movement upwards, or break down below $2.20, turning market structure bearish again.
If you thought we might find more clarity with ATOM/BTC, you were somewhat correct although it is still not the easiest chart to decipher; the Weekly shows us a similar downtrend to that of the dollar pair but with a consolidation currently forming between 27k satoshis and 39k satoshis, with the important pivot above that at 47k satoshis. On the Daily, I have provided the price trajectory I would like to see unfold before entering a long, with the break above 39k satoshis the most important aspect of this. I would then look for a short-term long into the pivot at 47k satoshis, covering there and re-longing on a clean break above the level into trendline resistance. If we start to break lower from here rather than higher, there really isn’t much support all the way down to the all-time low at 17.9k satoshis.
Basic Attention Token:
Price: $0.187 (2116 satoshis)
Market Cap: $273.24mn (30,844 BTC)
Thoughts: Basic Attention Token, or BAT, is rather attractive at these prices, in my opinion, with a reluctance to move lower on its BTC pair during March being a key indicator of strength, where other largecaps suffered heavily.
Looking at BAT/BTC, the Weekly chart shows us the 273-day consolidation period that has been playing out since August 2019 above 1600 satoshis, with price mostly holding up above the cyclical support at 2030 satoshis other than for a few brief weeks in August/September 2019 – the period I consider to be the Anger > Depression phase of BAT’s market cycle. This period did break the cyclical support but as of October 2019 BAT was trading back above the level, testing prior support at 3200 satoshis as resistance before continuing its consolidation above 2000 satoshis. On the Daily chart, I have marked out what I am looking for prior to an entry, with a strong close above the range resistance my first indicator of a cyclical reversal. If we see that, I would buy any dip back into the range resistance, with the subsequent move up being the disbelief period of the cycle. If I see such a move, I would be a holder of spot BAT with an initial target of 5600 satoshis, followed by the all-time high at 9400 satoshis.
Looking at BAT/USD, on the Daily chart we can clearly see a double bottom sweep during March capitulation below $0.14, all the way below the range low from February 2019 at $0.098. Price has reclaimed the double bottom since, now trading above the yearly open with the original breakdown level acting as overhead resistance. As a pair, BAT/USD is in a no-trade zone for me. Either we move above the breakdown area, reclaiming it as support, and then continue to move higher towards trendline resistance, or we close back below the yearly open (likely led by a drop in BTC/USD) and move back towards $0.14.
Price: $0.002 (23 satoshis)
Market Cap: $86.01mn (9,709 BTC)
Thoughts: Siacoin is one of the strongest projects in the space fundamentally, as well as being one of the most attractive midcaps on a price basis.
Beginning with SC/USD on the Weekly timeframe, we can see that price has played out several market cycles in its lifetime, with the most recent bear cycle beginning late in 2017 and continuing to this day, with lower-lows and lower-highs since. That said, we can quite clearly see that Siacoin likes to trade back into old ranges, retesting range resistance as support before expanding; this occurred in March during Bitcoin’s capitulation, sending SC/USD into the 2916 range high at $0.00115. Price failed to close below it, having now bounced back into prior support at $0.002. I would be looking for a move above $0.0042 before thinking that we are reversing the long-term downtrend, but the signs are there.
Looking at SC/BTC, we can see at 322-day range at old pre-bull cycle accumulation areas from before 2018, with current resistance at the support of the Q4 2017 base around 44 satoshis. I have been a buyer inside this range below 25 satoshis, looking to hold for the majority of the next cycle. Fundamentally, Siacoin has grown leaps and bounds in the 4 years since 2016, so why would I not be a buyer at 2016 prices?
Price: $0.0074 (83 satoshis)
Market Cap: $74.3mn (8,387 BTC)
Thoughts: Zilliqa is one of the few coins on Binance to have never experienced a proper cycle since its inception, having begun trading in the early stages of the bear market in 2018.
Looking at ZIL/USD, from the Weekly chart we can clearly see a downtrend since inception, with the all-time high at $0.24 back in May 2018. Price has consistently broke new lows and lower-highs, with the most recent all-time low forming at $0.002 in March this year. Before this, price failed to break out above trendline resistance, subsequently falling through its multi-month floor at $0.0041. Price has since reversed hard, finally – for the first time in its history – breaking above and holding above trendline resistance from its all-time high. If we are able to continue and break above $0.01, I would consider the macro reversal to be underway, with the first real bull cycle beginning for Zilliqa, as this would be the first bullish break in Weekly market structure for ZIL/USD. Moreover, having monitored the top addresses for ZIL in recent months, their have been net inflows – I may actually make an entirely separate post for you guys about the activity here. That said, despite the bullish reversal since capitulation, we have yet to make a higher-high, so let’s not jump the gun – if we do fail to move higher here, we may well fall back below the trendline, or at the very least retest it as support.
Most deliciously, ZIL/BTC has been range-bound between 50 and 100 satoshis for over 9 months, with plenty of volume taking place in this range, backed up by on-chain flows. This is precisely the sort of consolidation I like to see preceding a new cycle. I have been a buyer since November 2019, adding here and there inside this range. I am looking to hold for at least several months, but risk-averse speculators should perhaps await a breakout above the range before entering positions. I do think we see 350 satoshis this year, but macro conditions are undoubtedly not favourable at the moment.
Price: $0.0138 (157 satoshis)
Market Cap: $17.59mn (1,986 BTC)
Looking at the Weekly chart, we can see that price spent most of 2018 in a downtrend, leading to all-time lows at $0.001 in Q1 2019. From here, price has been rallying, creating a series of higher-lows and higher-highs that led to the high of $0.024 in October 2019. Price then began a period of consolidation, breaking lower but on significantly lower volume. In March, price briefly broke below $0.0065 – the low from September 2019 that preceded the high at $0.024. The reversal was fairly swift and we now have DAG in an important area; at $0.014, it either forms a lower high and potentially retests the $0.0065 area or it continues to move forward and above the 2019 highs towards the all-time high at $0.035.
Turning to the Daily, I have drawn on the short-term trendline resistance from the 2019 high, which looms overhead. More importantly, we can see the clear trend of lower and lower volume since the 2019 high, including on the recent reversal. As such, without a significant injection of volume, I am not expecting a break above the trendline resistance at the moment, instead expecting a retest of the lows from March if we break down here. This would be my prime accumulation area: $0.065 or lower. However, if we do see some volume start to come in and price climbs above trendline resistance, I think it is off to the races and new all-time highs within a few weeks following that breakout.
Looking at DAG/BTC, the prospects look much better for price, with a breakout above trendline resistance having already occurred, though not on convincing volume. That said, price has refused to fall below the range breakout level at 70 satoshis that had capped price for 266 days in 2019. If we close above 196 satoshis, the series of lower highs and lows will be broken and I would expect volume to begin to pick up along with bullish continuation. Irrespective of short-term movements, however, I am a keen buyer of DAG on dips.
Price: $0.133 (1500 satoshis)
Market Cap: $6.163mn (695 BTC)
Thoughts: Given the lack of price-history for V-ID, we don’t need a Weekly chart here. What I will say is that V-ID is one of the few newer projects in this space that I am expecting big things from, based mostly on strong fundamentals and undervaluation of the underlying business relative to the token price (you can learn more about it in my Coin Report). For the purposes of this analysis, it will suffice to say that the business, which is only possibly via purchase and usage of the token, is generating the sort of revenues that give its market cap a 2-3x price/sales ratio. Given the serious lack of revenue-generating tokens in this space, I am very much a V-ID bull for 2020 and onwards.
Looking at its USD chart, we can see a classic market cycle having played out in 2019, with the all-time high forming at $0.548 in June, followed by prolonged bleeding into the final months of that year. Price found resistance on numerous occasions at $0.14, before finding a base above the all-time low at $0.044. This led to a slow grind up and a false breakout earlier this year, very much characteristic of a test pump, with price then falling back to retest the all-time low. Since, price has recovered and is now retested $0.14 as resistance. If we get a close above the level, I think we rally into $0.28.
Turning to VIDT/BTC, we can see a very similar pattern of price-action, with a 106-day range in Q4 2019 that preceded the false breakout into resistance at 2740 satoshis. The all-time high was formed back in June 2019 at 5000 satoshis, but I have been buying below 1500 satoshis as price has returned to the accumulation range with a view to hold for new all-time highs.
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