Market Outlook #91 (31st August 2020)
Hello, and welcome to the 91st instalment of my Market Outlook.
In this week’s post, I will be covering Bitcoin, Ethereum, Binance Coin, Tezos, Algorand, Fantom. Constellation and Ambrosus.
This – along with tomorrow’s subscriber-exclusive Coin Report on Siacoin – will be the final post before I take a brief holiday for ~10 days.
Let’s crack on:
Bitcoin:
Weekly:
Daily:
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:
Daily:
ETH/BTC
Weekly:
Daily:
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.
Binance Coin:
BNB/USD
Weekly:
Daily:
BNB/BTC
Weekly:
Daily:
Price: $23.37 (0.00199 BTC)
Market Cap: $3.375bn (287,475 BTC)
Thoughts: Binance Coin has been somewhat of a laggard among the majors but I do think it looks vaguely promising here, with plenty of upside available.
If we look at BNB/USD, from the weekly we can see that price recently broke out above trendline resistance from the all-time high at $43.50. Since then, price has been consolidating below yearly highs at $27.30 (which has become a reclaimed area of resistance from the 2018 highs. Support is not far below at $19.40, which was the resistance of the previous consolidation range before this recent expansion. So, we are sort of in no man’s land, at present. Turning to the daily, however, we can see that price has been forming a flat top at $24.60 and trendline support from July is pushing price higher, with ultimate resolution of the pattern expected by mid-September. With the rest of the market continuing to look quite bullish, I would expect an upside breakout here, likely within the next week or so. But, there isn’t a clear trade for me here.
If we turn to BNB/BTC, there is clearer price-action, in my opinion. Beginning with the weekly, we can see that price has recently found support at 0.0016, which was previously resistance in 2018. It is also struggling to close the weekly above 0.002, which is short-term resistance. The primary area of resistance ahead is ~30% higher at 0.00267. Now, turning to the daily, we can see that price is forming a clear ascending triangle, having bounced off of range support and found resistance at the 360-day moving average, where it has consolidated. As such, buying here with a tight stop at range support and with a target of 0.00267 seems a decent setup to me, with ~1.5R available; tighter stops would, of course, improve the R here, but risk-averse traders have the most clear invalidation on a break below range support.
Tezos:
XTZ/USD
Weekly:
Daily:
XTZ/BTC
Weekly:
Daily:
Price: $3.35 (28,533 satoshis)
Market Cap: $2.484bn (211,618 BTC)
Thoughts: Tezos has had a little bit of a slip since it broke new all-time highs, but, from a risk/reward perspective, current price-action is fantastic.
Looking at XTZ/USD, we can see that price cleared out the previous ATH at $3.95, hitting $4.53 before finding resistance a few weeks ago. Since, price has fallen back below the previous high, but is sitting just above prior range resistance and on trendline support from March. If we turn to the daily, we can see that price has been pulling back into the previous range on declining volume, which is what we want to see as potential buyers, Moreover, price has just bounced off of trendline resistance and is sitting above that $3.05 resistance turned support. This is an optimal entry for the pair, in my opinion, as invalidation is very clear (a close below ~$3) whilst the reward is simply for trend continuation to take this to a new all-time high by mid-October.
Turning to XTZ/BTC, the picture is quite similar, with the weekly showing a clear breakout on good volume above the trendline resistance, with price also printing a higher-high above 36k satoshis at 38.7k satoshis a few weeks ago. Price struggled to remain above resistance and has since traded back into the range but on declining volume, once more. Turning to the daily, we can see that price has come into the 200dMA but lost it, although this has occurred twice prior before a reversal. Invalidation for buyers is as clear as it gets with the 24k satoshi area having acted as support for the past 5 months or so. I am a buyer here with a stop a little lower on a daily close below the 360dMA, looking for new all-time highs.
Algorand:
ALGO/USD
Daily:
ALGO/BTC
Daily:
Price: $0.51 (4,418 satoshis)
Market Cap: $400.34mn (34,097 BTC)
Thoughts: Algorand has been performing very well for the majority of Q3 and I expect it to continue its trend into 2021.
Looking at ALGO/USD, we can see that price broke out above prior resistance turned support (and the yearly high) at $0.52 earlier this month, extending above $0.70 before finding resistance. Price has since begun to pull back into $0.52 on declining volume, with the level potentially acting as reclaimed support and the base before the next leg of the rally into $0.90. Again, I am long ALGO here on low leverage, expecting trend continuation.
Turning to ALGO/BTC, the picture is very much the same, with price having broken out above the yearly high at 5350 satoshis before pulling back towards the prior range resistance at 4060 satoshis on declining volume. I have marked out the sort of trajectory I would expect to see for ALGO’s third leg up against BTC, with a rounded bottom above 4060 satoshis leading to a run towards 8330 satoshis. Long and strong.
Fantom:
FTM/USD
Weekly:
Daily:
FTM/BTC
Weekly:
Daily:
Price: $0.038 (327 satoshis)
Market Cap: $81.34mn (6,927 BTC)
Thoughts: Fantom has just cleared new all-time highs against the Dollar, after recently breaking to new market-cap all-time highs last week. I am expecting new highs versus BTC to follow, but we may need to consolidate for a while before that occurs.
If we look at FTM/USD, we can see how strong the reversal has been since March capitulation, with price rallying from $0.0016 to new all-time highs today at $0.048 (~30x vs USD). Volume hasn’t been that strong on the rally since the huge volume on the breakout above $0.009, which is a little concerning and has prompted me to scale out some profits here, but I retain a significant position expecting higher prices regardless. If we briefly turn to the daily, we can see that price tagged the 1.618 extension of the recent range in clearing the previous all-time high, and I would expect it to continue towards the 2.618 at $0.061 over the coming weeks.
Turning to FTM/BTC, price has come into resistance on this pair too today, with the 375-satoshi level having capped price for most of its history. If we look at the daily, we can see that price has been advancing in parabola since the breakout above the 200dMA in June this year. The most recent trendline support would see price retest the all-time high from June 2019 at 500 satoshis by mid-October, which I do expect to occur based on the momentum and the evolving narrative around DeFi. That said, this is of course a good area to start considering scaling out some profits, but there is no doubt this could move higher towards Q4.
Constellation:
DAG/USD
Weekly:
Daily:
DAG/BTC
Weekly:
Daily:
Price: $0.019 (168 satoshis)
Market Cap: $24.942mn (2,124 BTC)
Thoughts: Constellation remains one of my favourite lowcap projects, particularly given the fact that it hasn’t really moved this year.
If we look at DAG/USD, we can see that price hit a high of $0.024 in November 2019, before falling off to find support at $0.0065 during March 2020 capitulation. This entire decline has been reversed since, with price poking above the $0.024 high a couple of weeks ago but failing to close above the level. Nonetheless, the breakout above trendline resistance was significant, and I am expecting bullish continuation towards new all-time highs to follow. If price manages to retain its current trendline support, that all-time high would be expected to be retested before November.
If we turn to DAG/BTC, we can see that price is still well below the highs of November 2020 at 285 satoshis, which, for me, was the first wave of Constellation’s bull cycle. Since that high, price has fallen off to retest range resistance at ~80 satoshis as support, with price having rallied towards 195 satoshis from the level. I am expecting some consolidation above the 360dMA before price rallies towards that 285-satoshi high; a clean break on the weekly above that would open up a move towards new all-time highs, as there is literally no resistance between ~380 satoshis and the all-time high at 682.
Ambrosus:
AMB/BTC
Weekly:
Daily:
Price: $0.033 (279 satoshis)
Market Cap: $3.797mn (323 BTC)
Thoughts: I thought I’d conclude this week’s post with a microcap that has barely budged this year against BTC but is continuing to be developed, with its mainnet having recently been released and with Binance supporting its token swap to that mainnet.
Given the importance (and increasing difficulty) of finding projects that remain alive after a two-year bear market but also haven’t broken out of their ranges and that trade on liquid exchanges, Ambrosus seemed a good fit. If we look at the weekly, we can see that price has been range-bound between its all-time low at 76 satoshis and range resistance at 480 satoshis for over a year, although (as you can see from the daily) the bulk of that period was spent with 145 satoshis as support. Turning to the daily, we can see that, though there was a good amount of volume earlier in the range, volume has picked up massively since mid-July, with price having now broken above its 360dMA, retesting it as support. I am cycling out some profits from coins that have run heavily already and are at resistance and buying AMB here, with a fixed-risk allocation (as I do with all microcaps), although with clear invalidation if price was to break new all-time lows. The primary target here is the previous cyclical low at 960 satoshis.
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 nik@altcointradershandbook.com.
Have a good holiday! Stay safe!!
Cheers!