Following the parabolic rise of Ethereum and Ripple over the preceding days, yesterday, the major cryptocurrencies entered a pullback, and despite another rally attempt, the segment-wide surge ran out of steam, ending with a wild sell-off following the US close. The early leader of the strong rally, Bitcoin failed to hit a significant new high for days, and it broke its short-term trendline, which, together with an initial support-brake, led to a sudden spike lower across the market.
Bitcoin dipped below $6500 on all of the major exchanges during the move, but on a positive note, it managed to stabilize above $7000, still down by about 20% of its recent highs. The most valuable coin’s decline triggered double-digit losses in all of the top altcoins, and even though the overbought short-term momentum readings are all but cleared thanks to the dip, our trend model remains on short-term sell signals in light of the still bearish long-term pressures and the extended counter-trend move over the past months.
While the blow-off top doesn’t mean that we won’t see a re-test of the highs, downside risks remain very high here. So, even though a quick recovery could lead to renewed buy signals, as of now, traders and investors should still stay away from entering new positions, even as several majors are still within their rising short-term trend channels.
BTC/USD, 4-Hour Chart Analysis
Bitcoin violated its initial support zone between $7600 and $7800 yesterday in late trading after drifting out of its rising short-term trend channel and that led to an avalanche of take-profit and stop-loss orders. After the initial sell-off, we saw a strong rebound in the market of BTC and the coin is currently trading near the $7000 level, well above its swing low from Sunday, which leaves the door open for another swing higher.
That said, given the still fragile long-term technicals and the recent parabolic move, odds are not in favor of bulls here, so even in the case of the recovery and a renewed buy signal, traders should only enter small positions, as we still expect a move below the structurally important $5850 level. Above that further support is found near $6500, $6100 and $6000, while the recent swing high near $8500 is also ahead as strong resistance.
XRP/USD, 4-Hour Chart Analysis
Ripple was the last major to join the surge following a lengthy period of relative weakness, and the furious rally quickly led to an overbought short-term setup in the coin. After triggering a sell signal in our trend model, the coin gave bake a large chunk of its gains. Although XRP is still above its previous range and the $0.30 level, it fell below its April high, showing signs of relative weakness yet again.
While the rally might still resume, and the overbought momentum reading swill soon be cleared, the coin remains in a hostile long-term setup, and with that in mind, until we see clear signs of short-term strength, traders shouldn’t enter even short-term positions. Initial resistance is ahead near $0.3750, with further levels at $0.40, $0.42 and $0.46, while support is now found near $0.3550, just above $0.33, and at $0.32.
Ethereum Held by Trendline, as Litecoi Fights for $85 Support
ETH/USD, 4-Hour Chart Analysis
From a short-term technical perspective, Ethereum is now the strongest among the majors, holding up above its steep rising trendline. That said, the coin has been struggling to show bullish momentum since the initial post-plunge bounce, and although ETH surprised us with its strength this week, our trend model remains on sell signals on both time-frames here.
ETH’s relative stability is a small plus for bulls here, but the coin remains in a dangerous long-term position and although it could resume its advance easier than the other majors, traders should be aware of the still high downside risks following the extended counter-trend move and the recent parabolic advance. Key long-term support is found near $200, $180, and $160, while resistance is now ahead near $260 and $275.
LTC/USD, 4-Hour Chart Analysis
Litecoin remained relatively stable amid the strong sell-off, after being left out of the parabolic rally, and the lower boundary of the primary long-term support zone between $85 and $90 held up the coin throughout the day. The early leader of the counter-trend move is still likely to fall significantly following the lengthy rally, as odds favor the continuation of the bear market.
Our trend model remains on sell signals on both time-frames, despite the coin’s current stability and the still intact short-term trend. Below $85, support is found between $72.50 and $75, with a crucial long-term zone at $64, while above the previous swing high, the next level is resistance is ahead near $110.
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Disclaimer: The analyst owns cryptocurrencies. He holds investment positions in the coins, but doesn’t engage in short-term or day-trading, nor does he hold short positions on any of the coins.