Market Outlook #91 (Free Edition)

Market Outlook #91 (Free Edition)

Market Outlook #91 (31st August 2020)

Hello, and welcome to the free edition of the 91st Market Outlook!

In this week’s post, I will just be covering Bitcoin and Ethereum.

If you’d like to check out the premium version of this post, including analysis and trade ideas for Tezos, Binance Coin, Algorand, Fantom, Constellation and more you can find it here.

Bitcoin:

Weekly:

BTCUSDWeekly

Daily:

BTCUSDDaily

Price: $11,730

Market Cap: $216.77bn

Thoughts: There isn’t a great deal to discuss for Bitcoin following last week’s mega-rant, as price has remained well within the range that has recently formed between support at $10,600 and resistance at $12,500.

Looking at the weekly chart, we can see the indecision that is currently playing out as price consolidates in this range, with the week prior to last closing quite bearish (having swept $12,170 into $12,500 and rejected, as discussed), but last week’s candle closing relatively bullish, as price sold off early in the week but bounced hard and closed near weekly highs. In short, the market is simply consolidating, and there isn’t much more to than that, in my opinion. Volume is moderate following the breakout above $10,600 and price appears to be playing out a similar pattern to that prior to the breakout; i.e. tightening weekly ranges before expansion. Now, as I mentioned last week, our line in the sand is $10,600, which I would want to see defended should we retest the level. Whilst we’re above it, I think price continues to consolidate before retesting $12,500; break above that level and the $13,900 area will absolutely be the most important level to consider.

Turning to the daily, there isn’t much to add here except that we have found a new local support level at $11,080, although I do not like the fact that a clean double-bottom has formed here, as these often get swept, especially within ranges. So, looking at this, I would not be surprised to see another sell-off before we break out of this range, in order to clear out any longs with stops resting beneath the double-bottom and to trigger any breakout shorts before reversing. That doesn’t mean the level must be swept; it is just something to be mindful of if you are currently sitting in a long. I do think we’ll see $12,170 retested this week, which may be the resistance needed to prompt another sell-off into $11,080. Nonetheless, these are all minor moves within a tight range. Big picture is very much bullish for the remainder of the year unless that $10,600 level gives way.


Ethereum:

ETH/USD

Weekly:

ETHUSDWeekly

Daily:

ETHUSDDaily

ETH/BTC

Weekly:

ETHBTCWeekly

Daily:

ETHBTCDaily

Price: $435.77 (0.03719 BTC)

Market Cap: $49.041bn (4,177,684 BTC)

Thoughts: As I mentioned last week, Ethereum is the market leader and has been this entire year, and that has not changed.

Following the bearish divergences that were highlighted, we saw some sell-offs into support, but they were bought up and price is now pushing right up against yearly highs on both pairs. Beginning with ETH/USD, the weekly closed very strong, effectively at the precise weekly high, with early action this week following on from the move and pushing higher. Volume was slightly lower than the previous week but still relatively high. We also saw a retest of $365 last week following those bearish divergences, which has held firmly as support; given this, there is no reason not to expect a retest of $450 to be imminent. If price can close the weekly above $450, it is going for $553, which happens to be a little shy of the 38.2% retracement of the entire bear market from $1415 to $80 at $588, so we may over-extend coming into that level before serious resistance is found. In short, above $450, there is a lot of open space for another 20-25% rally. Briefly looking at the daily, the range is currently $365 to $450, with price pushing for that retest of range resistance today. If we do reject $450, I think it’ll simply be a case of retesting range support before another leg up can happen.

Turning to ETH/BTC, its resilience has been quite something, and Bitcoin Dominance (thanks to ETH) conversely looks ready to shit the bed. If we take a look at the weekly, we can see the channel resistance having stalled the pair’s rally a couple of weeks ago, but price has since printed a bullish engulfing of the previous week’s bearish candle. The curve of the rally remains parabolic and it appears to be setting up for fireworks in the next ~2 months, with all roads pointing to 0.042. As I have said previously, it is only when price closes above 0.042 that I will be convinced that markets are going start getting truly euphoric (against historical measures). If we do see that close, I’d expect a swift leg up into 0.054 before a breather and then a run towards the all-time high at 0.125, followed by market-wide euphoria. This could quite conceivably happen once key technical resistance is overcome, simply because of the growing DeFi narrative that has completely taken hold of crypto. But that is still several months off, if it does occur, so, for now, it is important to play this level to level and not get ahead of ourselves. In fact, if we look at the daily, we can see that despite the strength in the rally off the support at 0.0326 last week, volume has not really picked up much and RSI is still printing bearish divergence, where a fourth higher-high above 0.0377 could form a fourth consecutive bearish divergence. If volume fails to come in on a breakout above that level and that fourth bearish divergence is printed, I would expect some more significant corrections to occur in both ETH and other alts. I am certainly not going to be shorting this market though; that’s a fool’s game.

And that concludes this week’s free Market Outlook.

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