Market Outlook #98 (26th October 2020)
Hello, and welcome to the free edition of the 98th Market Outlook.
In these free versions of the Outlook, I provide my analysis on Bitcoin and Ethereum.
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Market Cap: $242.253bn
Thoughts: Well, what a week we’ve had. I take four days off the grid and return to a mammoth weekly close for Bitcoin.
Looking firstly at the weekly, the most important thing to note here is that the close above $12,500 on the highest volume in a couple of months is very significant. We now have a higher-high after a breakout > retest of the $10,500 triple-top, confirming that area as new support and all but ensuring a retest of the most important level for BTC: $13,860 – the all-time high monthly close. Given that we are now only a few days away from October’s close, this could be precisely the breakout needed in order to have the momentum to push through that level, though I don’t doubt we will see some supply come in as the level is approached. What I am focused on here is the series of higher-highs and higher-lows we have put in since March, all of which has been within the November 2018 to July 2019 range. That is why that $13.9k area is so important; not only do we have the highest monthly close of all-time there, but that is the range high that has capped BTC throughout its bear market. Break above there and I think we accelerate towards the all-time high over the coming weeks, which itself is a crazy statement but is very much possible given the lack of macro resistance between the two levels. As a dip buyer, any move into $12,500 or even as low as $12,100 would be ideal for a long, in my opinion, with a target of ~$13,800. Now, as I’ve stated recently, we can’t get too ahead of ourselves whilst the most significant resistance lies directly overhead, but last week’s close was an overt signal that this is headed higher.
Turning to the daily, we can see the strength of the breakout here more clearly, with price ramping up towards that $12,100 resistance before blasting straight through it the following day. Given that breakout and push towards the new yearly high at $13,368, I would love to get long on a dip back into that level (or a little higher, given Bitcoin’s propensity to be front-run). Now, the more likely scenario is that we see some selling into October close and that’s when I’d look to get leveraged long for a retest of $13,860, but if we don’t get that dip and push straight into the level I’ll be sitting on my hands and waiting for a reaction. A monthly close above $12,500 and I’ll be looking for any reason to get long in November. If we look at the breakout post-$10,600, price retested that level a few days later before consolidating higher; I wouldn’t be surprised to see a similar pattern of price-action here.
Price: $406.50 (0.031 BTC)
Market Cap: $46.001bn (3,511,546 BTC)
Thoughts: Ethereum is certainly not the leader anymore, with ETH/USD lagging hard because ETH/BTC is being sold off on Bitcoin rallies rather than rallying alongside it as we have seen for much of 2020. This indicates to me that we have transitioned into a period of altcoin underperformance and Bitcoin dominance – and this may well last until new all-time highs are found if BTC can get above $13.9k.
Looking at ETH/USD, we can see from the weekly that following several weeks of consolidation around $365, last week’s rally in BTC/USD has dragged the pair up above the level, closing firmly above $400. Resistance overhead is at $448, but ETH will continue to underperform whilst ETH/BTC fails to make any higher-highs and keeps bleeding out. As such, I wouldn’t expect to see new 2020 highs for ETH/USD until ETH/BTC ceases bleeding. What is interesting, however, is that we do appear to have formed a rounded bottom and higher-low above the 200wMA at $309; I fully expect this low to now hold and for price to eventually follow BTC higher. If we quickly turn to the daily, one positive from last week’s movements is that price broke out above the double top at $395, turning market structure bullish.
If we now look at ETH/BTC, we can see that the weekly closed bearish for the pair, though holding above 0.031 for its close and sweeping the double bottom at that level. That said there is nothing bullish about the recent structure that would indicate a push higher following the sweep; instead, I am looking at that 0.0286 area that I’ve had marked out for some time as a place for the pair to reverse, printing a macro higher-low in the process before continuing its trend higher. If we look at the daily, we did see a daily close below 0.031, confirming the series of lower-lows on this timeframe. As such, I do expect new lows to be found this week as price reaches for that 200dMA sitting just above prior resistance at 0.0286. I will absolutely be a buyer if we see the pair come into this area and print signs of reversal. Now, should my expectations be wrong and we see ETH/BTC hold around here, I would not be interested in being long ETH instead of BTC until we see market structure turn bullish again; that is, a higher-high followed by a higher-low.
And that concludes this week’s free Market Outlook.
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