Cryptocurrencies are a part of evolving technology and are still in a nascent stage.So, they are likely to remain quite volatile compared to the other matured asset classes.
The early investors in cryptocurrencies were mostly technology enthusiasts who saw a future in them. After the humongous returns of 2017, more and more institutional investors want to join the party.
This is changing the way the cryptocurrencies perform. In the past 90-days, the correlation between the S&P 500 and cryptocurrencies has risen sharply to 33 percent, which is way above the previous high reading of 19 percent, according to Nick Colas, co-founder of DataTrek Research. The long-term average is way lower at 1 percent.
2018 has turned out to be hugely negative to both the stock market and the cryptocurrencies. Let’s see if the top coins point towards a resumption of the downtrend, similar to the S&P 500.
BTC/USD
While it is better to trade with the trend, at times, strong counter-trend rallies can also be profitable. Bitcoin is trading inside a descending channel with both the 20-day EMA and the 50-day EMA trending down. This shows that it is in a confirmed downtrend. The current pullback is likely to face resistance at the downtrend line and the 20-day EMA.
In a downtrend, when the selling is overdone, and prices reach attractive levels, it can offer a short-term trading opportunity.
We believe that if the BTC/USD pair holds above the February 06 lows during the next leg down, the traders will have an opportunity to enter long positions. The ideal time to buy would be when prices break out of the downtrend line and the 20-day EMA. The profit objective of such a trade will be a move towards the resistance line of the descending channel.
However, if the price breaks down and goes on to make a new low, the above-mentioned trading opportunity will be invalidated.
ETH/USD
Ethereum plunged from $1,265 levels to $565.54 levels within nine days. The February 06 low also coincided with the support line of the descending channel.
The moving averages have completed a bearish crossover, which points to the possibility of another leg down. We expect the current leg of the pullback to face resistance at the 20-day EMA. If the ETH/USD pair stays above the February 06 lows, it will point to a possible short-term bottom, which can be purchased.
We should avoid the trade if the cryptocurrency sinks to new lows.
BCH/USD
Yesterday, Bitcoin Cash made a strong move up. It is now likely to move towards the downtrend line and the 20-day EMA where it might face strong resistance.
The BCH/USD pair will become positive in the short-term once it breaks out and sustains above the downtrend line. We expect it to form a bullish setup in the next few days. The first target objective is a move to $2,072 levels.
We currently don’t find any bullish pattern; hence, we do not recommend any trade on it.
XRP/USD
Ripple has caused a lot of heartburn to its investors. At the current price, it is still down about 67 percent from its peak. It has been trading in a small range for the past five days and is not finding much interest among the buyers.
However, we believe that if the XRP/USD pair breaks out of the 20-day EMA and the downtrend line, we can expect it to attract further buying, which can propel it towards the overhead resistance of $1.74. Therefore, we need to wait for a breakout above the 20-day EMA before buying.
Our view of a short-term bottom will prove to be wrong if the cryptocurrency breaks down of the lows formed on February 06.
XLM/USD
Stellar has become range bound for the past three days. Intraday, it is facing resistance at the previous support of $0.41.
A break above this level will again face selling at the resistance line of the descending channel. The trend on the XLM/USD pair will change only after it breaks out and sustains above the descending channel.
Stellar will become negative if it sustains below $0.30 levels.
LTC/USD
Litecoin is close to the 20-day EMA, which has acted as strong resistance on two previous occasions.
If the bulls break out of this level, they are likely to face another round of selling around the $175 mark, which has dual resistance, from the downtrend line and the horizontal line.
Once the LTC/USD pair breaks out of these resistances, it will probably start a new uptrend, which can carry it to $243 and after that to $307.
Traders can initiate long positions once the cryptocurrency breaks out and sustains above the $175 levels. We don’t have a specific stop loss position. We can update the same one once our buy levels are triggered.
ADA/BTC
Cardano is not finding buyers. It continues to struggle near the lows formed on February 02. It has also formed a descending triangle pattern, which is a bearish setup.
If the ADA/BTC pair breaks down and sustains below the horizontal support of 0.00004070, it will complete the descending triangle formation. After that, it will most likely slide to 0.0000246 levels where buying should emerge.
Our bearish view will be invalidated if the digital currency breaks out and closes above the downtrend line of the triangle.
NEO/USD
NEO is facing resistance at the moving averages, as outlined in our previous analysis. Additionally, it formed an inside day pattern yesterday, February 08, and it is likely to repeat the same pattern today.
These successive inside day patterns have the same effect as the coiling of the spring. Once the bulls breakout above $120 levels, a quick rally to the downtrend line at $140 might take place. Traders can keep an initial stop loss of $100, which can be trailed higher to reduce the risk.
On the other hand, if the NEO/USD pair breaks down instead of breaking out, it will become negative, and a retest of the February 06 lows is likely.
EOS/USD
EOS has broken out of the descending channel, which points to a waning bearish momentum. However, it has been facing resistance close to the $8.97 mark for a couple of days. A break above this level is likely to propel the cryptocurrency higher towards $10 and then to $12.
Very short-term traders can initiate a long position in the EOS/USD pair at $9 and keep an SL of $7.5. Still, this is a very risky trade; traders should use only 50 percent of their usual allocation.