Market Outlook #78 (27th May 2020)
Hello subscribers, and welcome to the fourth instalment of my premium Market Outlook and the 78th overall.
In this week’s post, I’ll be covering Bitcoin, Ethereum, ChainLink, Cardano, Siacoin, Golem, Ardor, Beam and Ankr.
As ever, if you have any suggestions for next week’s post, feel free to leave them in the comments below.
There’s a lot to cover here, so I’ll refrain from any further preamble:
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.
As mentioned in that post, $8160 was the level that I was looking at if price closed below $9970, which it did. I have marked out the current range high and low on the weekly chart, as well as overhead resistance via the double-top at $10,600 and the trendline resistance from the all-time high; however, right now, we aren’t particularly concerned with the weekly chart – not whilst price is trading inside prior weekly ranges.
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.
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 ETH/USD on the weekly timeframe, we can see that price remains firmly below trendline resistance and above the local swing-low at $175. The high from April at $228 is also capping price and volume is beginning to drop off a little. This consolidation below resistance is very similar to BTC, as one might expect, but I remain wary of the possibility that this is just a lower-high in a downtrend.
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.
ETH/BTC remains tightly wound, firmly below trendline resistance but also above the two higher-lows printed at 0.0201 and 0.0204. Last week’s close was strong and indicative of a swing-low before higher prices, but price is quite clearly struggling to get above the bottom end of the pivot zone at 0.023. Volume has been declining steadily for weeks now and I am wary of a descending triangle-esque pattern beginning to play out with a lower-high below trendline resistance and another test of 0.02 – a test that I don’t think will hold if it comes.
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.
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, the weekly depicts the consolidation that is occurring below the all-time highs, with the current range between $3.40 and $4.32 appearing to be a shorter-term consolidation within the long-term range that began when the old all-time high at $1.55 was flipped as support. Since, LINK has been bouncing between $1.55 and the all-time high at $5 but has been unable to break either side of the range. If we look at the daily, we can see the long-term range quite clearly, 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, weekly 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.
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, I have marked out the trajectory that I would want to see as a bull before getting long in any leveraged positions, with a flip of the resistance at $0.075 vital. 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.
Price: $0.0023 (25 satoshis)
Market Cap: $96.326mn (10,522 BTC)
Thoughts: Siacoin is a project that I have been an admirer of for years, as it has continued to develop and build throughout the bear market and has produced a genuinely useful service in its decentralised file and application sharing and hosting protocol.
But where it really gets interesting for me is the beautiful chart, with SC/BTC looking like the most classical altcoin market cycle, much like DOGE continues to be.
That said, let’s start with SC/USD, with the all-time high having formed at $0.11 in 2018, and price having continued to fall since, printing a low at the prior resistance at $0.0011 during March 2020 capitulation. Price has since recovered, spurred by BTC/USD primarily, and is now sitting somewhere in no man’s land, with resistance a way away at $0.004 and support down at that $0.0011 level. Looking at the daily, however, we can see consolidation occurring, between $0.0018 and $0.0024. If price breaks above local resistance, I think we’ll see a sharp leg up to $0.004.
Turning to SC/BTC, which is the focus of my attention, we can see a near-one-year range that has formed at prices that preceded the 2017/18 cycles, with range support at 15 satoshis and resistance at 35 satoshis. Firstly, I find it a gift to be able to buy SC below the prices I paid for it back in 2017 before it had really achieved anything. I am effectively getting 3 years of fundamental development for free baked into my speculative position. Secondly, as you can see from the Daily chart, there have been many accumulation spikes throughout this range-bound period, indicating serious speculative interest at these prices. As such, I have been buying in this range and will continue to add to my position incrementally. I am looking for 120 satoshis at the minimum.
Price: $0.049 (545 satoshis)
Market Cap: $49.085mn (5,361 BTC)
Thoughts: Golem is another one those 2017 projects that continued to build throughout the bear market and now looks poised for a strong cycle.
GNT/USD, much like SC/USD, doesn’t look particularly attractive just yet, with the long-term downtrend still in play, but the fact that 50% of the circulating supply was traded in one day in February piqued my interest.
Looking at GNT/BTC, it is very similar again to SC, with a 300+ day range at all-time lows and plenty of volume coming in. Price is also pushing up against e 360DMA that has kept price capped for over a year. Once ewe start to close above this, I think more volume starts to come in and price moves towards range resistance eat 830 satoshis. Break above that resistance and I’m looking for 1510 satoshis. As such, I am a buyer here, and I will look to add if price flips the 360DMA as support.
Price: $0.045 (498 satoshis)
Market Cap: $45.57mn (4,979 BTC)
Thoughts: Ardor is a project I have been a fan of for a while, and I have been a buyer below 640 satoshis, looking for a long-term hold.
If we look at ARDR/USD, the weekly shows us the strong downtrend that has been in play since the all-time high in 2018 at $2.60, with price forming a base at $0.045 in later 2018. Price then bounced hard into $0.14 before rejecting and printing new lows at $0.25. If I’m honest, the Dollar pair doesn’t look great, with a clear series of lower-highs and lower-lows.
But, I don’t overly concern myself with USD pairs for midcaps or lowcaps, as these are spot positions, usually held for months. USD pairs are very good for judging the latter stages of market cycles and finding exit targets but less so for finding cyclical entries. So, turning to ARDR/BTC, we can see that price has formed a range at all-time lows around 388 satoshis for 294 days, with range resistance at 780 satoshis. Last week, over 100% of the circulating supply was traded – this is a strong sign of speculative interest, as can more clearly be seen on the daily chart. As such, I have bought more Ardor in this range, giving me an average entry price of 565 satoshis (yes, I’m underwater). I will be looking to hold this position for a new cycle, with a first target of 2400 satoshis, which is a significant pivot on the weekly chart.
Price: $0.357 (3,897 satoshis)
Market Cap: $22.34mn (2,438 BTC)
Thoughts: A lot of people talk about Beam but I see nothing attractive about its price-action, with it still firmly in a downtrend that began as soon as it started trading.
Looking at BEAM/USD, here we can quite clearly see a series of lower-highs and lower-lows, with steepening trendline resistance, since the all-time high formed at $3.17 shortly after listing in February 2019. Price originally formed a support base at $0.38 following the all-time high and it is precisely that level that we are now seeing act as resistance as it is tested from below. Volume has begun to pick up, but there is no sign of the tide turning just yet. Until $0.38 is cleared on good volume and tested as support again, BEAM/USD remains looking down.
Turning to BEAM/BTC, a similar but even more brutal pattern of price-action appears here, with the all-time high forming at 89k satoshis and the all-time low only having formed a couple of weeks ago at 3,112 satoshis. Price is well-below the 200DMA and support continues to be flipped into resistance. Until I see these levels start to be reclaimed and price trade above the 200DMA, I am uninterested in Beam, as it is in bearish price-discovery.
Price: $0.0024 (26 satoshis)
Market Cap: $12.445mn (1,360 BTC)
Thoughts: Ankr is one of those projects that was launched in the middle of a bear market and never got to experience a bull cycle of its own, with its entire existence being a long, slow bleed into all-time lows. These are precisely the sorts of positions I like to take, as there is plenty of price discovery to occur when the cycles change.
Looking at the daily chart, we can see that price has spent its entire existence below the 200DMA and 360DMA, with a range having formed at the all-time low of 13 satoshis, with resistance at 37 satoshis. Within this range, we can see plenty of volume spikes – a common pattern of accumulation, particularly in low-cap projects, due to relative illiquidity. We can also see price beginning to break above the 200DMA and on good volume, with range resistance looming overhead. I am buying here and looking to hold for a few months potentially, with initial targets at 60 satoshis, 82 satoshis and above that at 150 satoshis. Risk-averse speculators would be wise to await a breakout above range resistance before considering entries.
And that concludes this week’s Market Outlook.
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