Market Outlook #77 (18th May 2020)
Hello subscribers, and welcome to the third instalment of my premium Market Outlook and the 77th overall.
In this week’s post, I’ll be covering Bitcoin, Ethereum, EOS, Dogecoin, Decred, Zilliqa, Komodo, LBRY Credits, Fantom and WeOwn.
Yeah, I know – it’s a lot of material to cover…
Settle in with a coffee and let’s crack on:
Market Cap: $178.446bn
Thoughts: To begin with this week, I thought I’d draw up the wedge that every man and his dog is currently watching and the trajectory that many seem to be anticipating. If you look at the first Weekly chart, you’ll see the pattern I’m talking about with some squiggles representing the period of consolidation within a tightening range that I’ve seen on my Twitter feed recently.
Firstly, when everyone is watching the exact same thing, the probability of it playing out in a textbook fashion diminishes. (Note: not disappears, but diminishes). Of course, this is not a statistical claim I’m making, merely an anecdotal one, but from my experience the most obvious classical patterns often get front-run or faked out in order to trap everyone anticipating their resolutions. As such, I do not think we continue consolidating inside this tightening range for the best part of the rest of this year before a breakout; instead, if we are to break out to the upside, I think it happens much sooner. Whether the breakout will be a false one or a real one, I cannot say, but I do think it happens sooner rather than later.
Now, turning to my current thoughts, you will recall from last week’s post that I mentioned that the $9480 level was very significant for me, as there would be many trapped longs looking to exit at that level. I was watching for any signs of weakness at the level in order to short a breakdown, but I also mentioned that if this level was reclaimed and no breakdown occurred, that reclamation should serve as a base for a move back up to the $10,550 double top.
Looking at the second Weekly chart, we can see that last week’s candle did indeed close strong, a couple of hundred dollars above $9480 with a large body. Unfortunately, we also printed an inside week. An inside week is simply a weekly candle which has a range that traded inside the range of the prior weekly candle; in this case, the bearish candle the week before last that that had a high of $10,085 and a low of $8100. This past week’s candle (as you’ll see more clearly) traded fully inside that previous week. What does this mean? Well, simply that neither top-side nor bottom-side liquidity was taken and their are resting orders at both ends waiting to be fulfilled. What often occurs is an inside week failure, where the week subsequent to the inside week trades to one end of the candle but closes back inside the range, with the following weekly candle trading to the untouched end. In doing so, both sides of liquidity are taken.
As you might have sussed, this is not particularly bullish in our current circumstances. If you look at the Daily chart, you can see that today’s price-action wicked above last week’s high at $9970; if we fail to close above that level, one could reasonably expect the other side of the range to be taken out before any further upside, all the way down at $8160. (For a clearer view on these levels, I have also provided an annotated hourly chart). In short, despite getting my trigger for further upside based on the Weekly close above $9480 – and thus a reclamation of not only prior resistance as support but also the trendline resistance from June 2019 – the inside week formation and today’s price-action makes me hesitant to enter any longs just yet. If we close back above $9970, either today or tomorrow, I would begin to look for longs, but the issue is that we would not know whether the inside week failure pattern is confirmed until the weekly close on Sunday night. If that candle closes below $9970, I’d expect the following week to be bearish with a move down to $8160; if it closes above $9970, I’d expect expansion to the upside.
Finally, turning to the hourly chart, more bearish indicators are presenting themselves. Regular readers will know my feelings about clean double-tops and double-bottoms, and as you can see this morning’s movements left a clean double-bottom at $9268. Now, that doesn’t necessitate downside, but it does concern me, particularly when we look at the clean sweep and breakdown of the inside week range high at $9970. That said, I am definitely thinking that the bullish scenario and bearish scenario could be in play simultaneously. How? Well, how can one cause the maximum amount of pain? Run price up above $10,550, clearing out the bears and enticing fresh longs as price breaks out above long-term resistance, then smash it back down and trap the bulls, with $9267 and $8160 becoming key downside targets in that case.
Price: $212.26 (0.02191 BTC)
Market Cap: $23.608bn (2,431,825 BTC)
Thoughts: Ethereum is beginning to look a little better but I remain hesitant whilst it is pinned below key levels.
If we look at the Weekly for ETH/USD, we can see that the potential lower high I marked out at $229 is looking less plausible now, as price continues to consolidate beneath the level, printing somewhat of a bull flag. I mentioned in last week’s post that I was simply watching for a close below the previous week’s low in order to confirm a breakdown and a move back towards $116, but instead we got a strong weekly close. The low of the prior week was taken out but price closed back above it, effectively at the high of the previous week. Good stuff for bulls. Now, however, as I also mentioned last week, we need to see a higher-high form in order for longs to look favourable.
Turning to the Daily, it is here that I’d like to see a higher-high form above $228, as this would revert market structure to bullish and confirm for me that the dump into the 200-day moving average at $176 was a bear trap. I’ve highlighted my bullish scenario and bearish scenario, with a high probability long setup occurring on a clean break and retest of $228, looking for the pre-capitulation swing-high to be taken out right into that trendline resistance. This is where I would look to cover a long as there is no guarantee of further upside – after all, it could still be a series of lower-highs at that level. For a short setup, I’d wait for a rejection up here and a breakdown below the 200DMA, selling a retest of $176 and looking for the meat of the move down to retest $116 as support.
Now, looking at ETH/BTC, from the Weekly, we can see that price is beginning to form a higher-low above the prior swing at 0.02 BTC, though this won’t be confirmed until this week’s close. More importantly, however, we remain below the pivot zone between 0.023 and 0.0245, which is my bull/bear line in the sand. Below it, I think ETH/BTC is at risk of moving lower. What I am watching for this week is a close back above 0.023 to confirm higher prices and possibly a move back above the lower high at 0.0261. If we get that close, next week I’ll be looking for longs. More significantly, I’d expect alts to begin moving up against BTC if ETH/BTC starts to move above the pivot zone.
Turning to the Daily to conclude, we can see the tightening range unfolding this year, as a series of lower-highs forms with higher-lows. Last week, I pointed out the rejection at the 0.023 level as resistance, leading to a test of 0.02 as support, which for now seems to be holding. Today’s movements do appear to be taking us back above the 200DMA and 360DMA, but we need a close above 0.022 to confirm this. If we get that strong close, I’d expect another test of 0.023 and, if bulls can push through it and reclaim it as support, a move up to 0.0245. Only once price is cleanly above 0.0245 on good volume, however, would I expect significantly higher prices to follow; for now, we remain in a tightening range.
Price: $2.67 (27,456 satoshis)
Market Cap: $2.46bn (253,354 BTC)
Thoughts: As I mentioned in the first premium Market Outlook, EOS does not look appealing at these levels, with the recent breakdown below support confirming that we need to steer clear of it.
Beginning with the Weekly for EOS/USD, we can see that the 2019 open price is acting as resistance at the moment, with consecutive weeks of failing to close above $2.85. Price does however appear to be holding up above the November 2019 low at $2.10, but this is largely due to BTC’s performance against the Dollar rather than that of EOS. There’s not much to add on the Daily but I have illustrated things more clearly there, with the primary levels for me being the 2019 open (as mentioned already) and the pre-capitulation support at $3.32 above us. Price also remains capped by two-year trendline resistance. No interest in EOS/USD for me at these prices, but I’m also not looking to short the pair due to my thoughts on BTC/USD.
More interestingly, from the Weekly chart for EOS/BTC, we can see that multi-month range support at 30k satoshis recently gave way, with price closing well below the level and continuing lower, now retesting it from below as resistance. There is nothing bullish about this chart at the moment, with the support zone still a good 10-15% lower at 24.7k satoshis. If the area between 21k satoshis and 24.7k satoshis does not hold as support (perhaps as a new accumulation base), then there is basically no support for EOS all the way down to sub-10k satoshis. As noted on the Daily, we are in bearish price discovery whilst below the range support at 30k satoshis, and until we reclaim that level I am not looking for any longs.
Price: $0.0025 (26 satoshis)
Market Cap: $316.87mn (32,626 BTC)
Thoughts: As many of you can probably determine from a quick glance at the Weekly chart for DOGE/BTC, Dogecoin is the most perfect example of the movement between periods of fear and periods of greed of any cryptocurrency ever.
No other chart is necessary for me when analysing DOGE, as my trades are always long-term, looking to capture the bulk of a cycle. I am now thinking that the current 308-day range between 20-35 satoshis is the new accumulation range, with range support having formed at prior cyclical lows. This is also the longest range in DOGE/BTC’s history and the longest period (623 days) without a new cyclical peak. As such, I am a buyer here at 27 satoshis, looking for prices above 100 satoshis this year.
Price: $13.99 (0.00145 BTC)
Market Cap: $162.135mn (16,747 BTC)
Thoughts: I see a lot of discussion on Decred online, but having glanced at the chart I realised that there is nothing bullish about its price-action since early 2018.
Unlike many large or midcap alts that have found support and formed long-term ranges and bases, Decred has continually been printing lower-highs and lower-lows, extending its downtrend.
DCR/USD is still very much in a downtrend, as is quite obvious, and the move back above the two prior swing-lows around $12-13 does not convince me that the downtrend is over yet, as much of this was fuelled by BTC/USD. The next level of support for Decred is all the way down at $3.70, although without another capitulation in BTC/USD, I don’t see such extreme downside risks playing out for the pair. But I also don’t see any reason to be bullish here. In fact, when we look at the Daily, we can see price pressing up against significant resistance (not too dissimilarly from other largecaps), but there is no real sense of bullish presence here, with a choppy uptrend back up into this resistance.
Turning to DCR/BTC, we can see why this is the case despite BTC being on a tear since its March capitulation. Since April 2018, price has been capped by trendline resistance, printing lower-highs and lower-lows for two years. This trend has yet to end, with price-action last week taking Decred below the double-bottom support at 0.00152. This support originally formed back in early 2017, to provide some context. Whilst DCR is below this trendline and printing lower-lows, I’d stay well clear of it.
Price: $0.01 (105 satoshis)
Market Cap: $102.996mn (10,604 BTC)
Thoughts: As I have mentioned in numerous posts, I am very bullish on Zilliqa and have been a buyer over the past few months. This past week, my patience has begun to be rewarded, as Zilliqa appears to be beginning its first ever proper bull cycle.
Beginning with ZIL/USD, we can see from the Weekly, that trendline resistance has capped ZIL since its inception in April 2018, with price forming a base at $0.004 for a few months back in Q3/4 2019. This preceded a false breakout above trendline resistance, which in turn preceded capitulation below range support, all the way down to $0.002 (50% below the prior support). Since then, price has been rallying, with trendline resistance being broken cleanly a few weeks ago on solid volume. This move was confirmed by the subsequent price-action into range resistance at $0.0065, which led to higher prices above $0.008 on rising volume. Price did appear to stall here, but last week confirmed the strength of the bulls as the candle closed firmly above the false breakout high at $0.01 on the highest volume yet. Price is now lingering below old support turned resistance at $0.0117; break above this and its blues skies above to $0.028.
Turning to ZIL/BTC, the most obvious thing to note here is that though price did experience a bit of a run following initial trading in March 2018, it was clearly short-lived, with price setting its all-time high in May at 2518 satoshis. Since, price has just continued to bleed, up until it hit 50 satoshis in Q4 2019, which became range support for several months. Range resistance is at 100 satoshis and price broke and closed above it on significant volume last week. Looking at the Daily, we can see that this resistance is now acting as support, with price having also closed above the 200DMA and 360DMA, the latter of which for the first time in its history. The next major resistance is all the way up at 200 satoshis, but I will be holding my position to capture as much of the bull cycle as I can.
For more on Zilliqa’s fundamentals, I wrote a detailed Coin Report a couple of months ago.
Price: $0.54 (5602 satoshis)
Market Cap: $65.216mn (6,714 BTC)
Thoughts: Komodo is one of my favourite projects in this space and I have been buying small amounts every so often for the past few months, attempting to get a good average entry for a long-term position.
If we first look at KMD/USD, we can see a similar pattern to that of DCR/USD, which is inherently unattractive. But, the difference between the two is that Komodo is not in a perpetual downtrend against BTC, unlike Decred, having formed a range for many months. Sticking with the Dollar pair for now, we can see that price has reclaimed range support at $0.45 but remains below the pivot at $0.88. If we start to move above this level, I’d expect the topside of the range at $1.66 to be test. Break above that and I would expect significant upside. For those that trade alts against USD, I have depicted on the Daily where I would look to enter a position, as price breaks above key resistance levels that are currently overhead.
I, however, do not trade spot alts against USD, so let’s look at KMD/BTC to figure out why I’ve been accumulating in recent months. As you can probably see immediately, there is a beautiful range that has formed at the same levels that preceded the 2017 bull cycle, with 5.2-6k satoshis acting as the support zone for 9 months now. I have been buying this range with a view to hold for many more months and the volume activity has supported my buying. Why? Well, look at the two volume spikes highlighted on the Daily. Between those two days, 13.6% of the circulating supply was traded, despite price remaining below range resistance. This is textbook accumulation. That doesn’t mean, however, that price won’t move lower from here – as you’ll see from the LBC/BTC charts below, price can break new lows following accumulation spikes. What it does mean however is that there is serious interest at these levels. If you’re more risk-averse but interesting Komodo, it may be wise to wait for the 360DMA to be reclaimed, which has been capping Komodo for over a year now.
Price: $0.049 (505 satoshis)
Market Cap: $17.85mn (1,838 BTC)
Thoughts: LBRY Credits got absolutely destroyed during the bear market of the past couple of years – there is no other way to put it. From its peak at 38,700 satoshis in May 2017, it fell to its current all-time low at 80 satoshis. Insane. Nonetheless, the project itself plodded on and survived and interesting appears to be returning to it right now, with clear early indicators for a cyclical reversal.
If we look at LBC/USD (I provided a log chart simply because linear is so difficult to look at due to its extremity), we can see that price hit $1.35 in January 2018, then falling for two years until the March 2020 capitulation sent it below the then-all-time-low of $0.0066 from October 2019, albeit very briefly. Price has since been on a tear, with last week closing above the yearly high at $0.038 and turning weekly market structure bullish for the first time since 2017.
Turning to LBC/BTC, we can see that price remains below the 2017 cyclical support at 870 satoshis, although it has rallied 6x from the all-time low at 80 satoshis. That gives you some sense of the extremities of this coin. Nonetheless, there is plenty of volume kicking in here and the Daily chart depicts the classic accumulation > test pump > shakeout > re-accumulation pattern that lowcap and microcap altcoins have experienced for years. The peak of that test pump was 505 satoshis, which is now acting as support. Unfortunately, I missed buying the bottom, which in hindsight looks so clear. I am however buying this on dips whilst it remains above its 200 and 360-day moving averages. Side note, LBC is one of the first coins I’ve seen experience a 200DMA/360DMA cross since 2017.
Price: $0.0048 (49 satoshis)
Market Cap: $8.67mn (893 BTC)
Thoughts: Fantom is a project that suffered extensively this year, where other alts at least began the year shining. That said, it is now looking quite interesting for a long-term play.
If we look at the Weekly chart, we can see that price formed its all-time high in May 2019 at 494 satoshis, then falling off swiftly and bleeding to new lows below the 2019 support at 90 satoshis in February 2020. This move below historical support has led to a new range forming, with the all-time low at 42 satoshis acting as range support and 53 satoshis acting as resistance.
If you turn to the Daily, you can see recent movements more clearly, including the trendline resistance from December 2019 that had been capping price and sending it to new lows throughout 2020. This preceded the formation of the range in March this year, with price now having broken above trendline resistance and appearing to retest it as support. I am buying Fantom here with a soft stop-loss on a weekly close below the all-time low, where I would then exit. I am expecting to hold for months if price does start to break higher for here, and I will look to add to my position if price is able to reclaim 90 satoshis as support.
Price: $0.017 (177 satoshis)
Market Cap: $1.718mn (177 BTC)
Thoughts: WeOwn is one of my favourite microcap plays at the moment, having experienced its first full cycle between Q4 2018 – Q4 2019, printing an all-time high at 9000 satoshis. It has since returned to the base that preceded the first bull cycle, in classic microcap fashion, and has formed a range between 100 – 380 satoshis for the past 200 days or so, with plenty of volume being traded during that time.
As depicted on the Weekly, I have accumulated a position with an average entry of 243 satoshis and I am looking to hold for new all-time highs. As this is a microcap position, there is no stop loss for me, instead opting to allocate a fixed percentage of my portfolio to the position. This is a ‘moon or doom’ kind of position, though the strong fundamentals of the project coupled with its classical price formations and on-chain activity make me very excited for the future of its token. More risk-averse speculators could opt for a break above range resistance at 386 satoshis before entering a position.
And that concludes this week’s Market Outlook.
I hope you’ve found some value in the read and thank you for supporting my work!
As ever, feel free to leave any comments or questions below, or email me directly at firstname.lastname@example.org.