Market Outlook #78 (27th May 2020)

Hello, hello and welcome to the 78th Market Outlook.

In this week’s post, I’ll be covering Bitcoin, Ethereum, Chainlink and Cardano.

I’ll refrain from rambling on but I would like to highlight the fact that altcoins, particularly smaller ones, are beginning to move away from multi-month ranges as of the past few days. There’s a lot to be keeping your eye on…

If any of my regular readers would like to take a look at the premium version of this post, in which I provide my thoughts on half a dozen of such alts, you can find it here.

Anyway, let’s crack on:

Bitcoin:

Price: $9155

Market Cap: $168.34bn

Thoughts: Bitcoin continues to trade inside the weekly range discussed in last week’s post, with the weekly close having confirmed inside week failure; a pattern in which price takes out one side of an inside week range, closes back inside the range and then takes out the opposing side subsequently.

Looking at the daily chart, we can see more clearly that a high formed at $10,100, which was followed by a strong dump into the 200DMA at ~$8k. This led to a near-full retrace but price found resistance at what became the inside week range high at $9970. Price earlier formed an inside week low at $8160, and the movements I mentioned last Monday that swept $9970 made me concerned about that range low being taken out in similar fashion. I was waiting for the weekly close to confirm the pattern, and confirm it did. As such, I am now looking for $8160 to be taken out before any further upside, which would have confluence with a retest of the 200-day moving average. As we can see on the chart, price has been printing lower highs and lows for the past few days, but today’s move has pushed price up back above $9100. Nonetheless, this is still a squeeze in my opinion and I favour intraday shorts whilst price remains below $9470 – the prior weekly resistance. Flip this level and we start printing a higher-low and I would consider the inside week failure pattern to be invalid, as market structure would become bullish and I’d expect another test of $10k.

It is also interesting to note that volume has been declining on this entire downswing, which is favourable for mid-term bulls like myself. As I mentioned last week, though I can clearly see a path to $8160, in order to take out that liquidity, I do expect price to break out upwards from this larger consolidation between the 200DMA and $10,600. It might actually be wise to sit out the intraday shorts if you aren’t a short-term trader and wait either for a sweep of that $8160 level to get long or for a flip of $9470 as support.

Ethereum:

ETH/USD

ETH/BTC

Price: $207 (0.0226 BTC)

Market Cap: $22.99bn (2,512,002 BTC)

Thoughts: Ethereum remains largely in consolidation at key levels, despite some small movements on the lower timeframes.

Looking at the daily for the Dollar pair, I have reprinted the two pathways I’m concerned with from last week, as neither have started to play out yet, with price very much in tightening consolidation, having printed local support and resistance at $191 and $217, respectively. I am waiting for a clean break either side of the range to give me a clue as to where this wants to move for the subsequent weeks; break above $217 and I think we test $228; close the weekly above there and I’ll be taking longs all the way up to $254; above that and I think we make a higher-high above $290 and all hell breaks loose. However, break $191 and I think we retest the 200DMA; break below that and it’s a long way down to $116.

Turning to the daily for ETH/BTC, we can see that bullish divergence did its job and has sent price into the 0.023 pivot, with price having closed back above the 360DMA and 200DMA, although these haven’t been so relevant for the pair for a while now. I have kept my doodle from last week depicting the trajectory I want to see price take in order to get comfortable getting long the pair, at least into 0.0245, where it could potentially form a lower-high. However, if we start to break down here, no doubt we try 0.02 again as support; fall below that and I think we retest 0.017.

Chainlink:

LINK/USD

LINK/BTC

Price: $3.87 (42,295 satoshis)

Market Cap: $1.355bn (148,034 BTC)

Thoughts: Chainlink seems to me to be in quite a good spot for bulls.

If we look at LINK/USD, we can see the long-term range that has formed between the prior all-time high at $1.55 and the current all-time high at $5, with a pivot at $3.40, which happens to be the current support. Resistance overhead is at $4.30 and if price was able to break above this I would expect to see a test of all-time highs fairly swiftly. Invalidation for longs would be a clean break below $3.40.

Turning to LINK/BTC, we can see that price continues to grind up on the trendline support that has been in play since May 2019. I am more fond of this pair than the Dollar pair for a long position, as we have confluence of trendline support and prior resistance at 40k satoshis, giving us a tight stop. If the weekly were to close below trendline support, that would be the first time in a year and signal the potential end of this bull-trend, although whilst above the swing-low at 32.8k satoshis, higher timeframe market structure remains bullish. I have marked out a potential trajectory for price on the daily chart, with an ascending triangle possibly forming at trendline support.

Cardano:

ADA/USD

ADA/BTC

Price: $0.055 (605 satoshis)

Market Cap: $1.43bn (156,747 BTC)

Thoughts: Cardano continues to look pretty good relative to other majors, but there is some way to go, at least against the Dollar, before a shift in sentiment can be confirmed.

Beginning with ADA/USD, we are still well below the prior swing-high and there is every chance that we print a lower-high and turn here if BTC/USD doesn’t play ball. If I was looking to get long, I’d want to wait for a breakout above $0.07. This would form a higher-high and open up a retest of $0.11 as resistance. It is at that point that a real bull cycle could kick in, as a reclamation of that level as support would leave very little resistance all the way to $0.35 and then the all-time high. This is a big if however and is likely largely dependent on whether BTC/USD is able to break out above $10,600 any time soon.

ADA/BTC presents a much more attractive picture at current prices, with a range having been formed at all-time lows since Q3 2019. On the daily timeframe, we can see that the range pre-2020 appeared to be accumulation that preceded a potential test pump into 700 satoshis earlier this year. Price then fell off along with the entire market, back into the range, and is now forming an ascending triangle with resistance at 626 satoshis. Price is also above the 200DMA and 360DMA, the latter of which had not been reclaimed in over a year. If we start to see price break upwards, I would look to get long with a target of 910 satoshis.

And that concludes this week’s Market Outlook.

I hope you’ve found some value in the read!

If you’d like any questions answered, feel free to leave them below.

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