Just wanted to alert people of a short term trade opportunity, or warn people from entering into the market on the bounce. Recently crpytocurrency markets have been in a serious downtrend. Many of the once high flying cryptos like ADA, XRP, and STR have fallen 50% from their tops at the beginning of the year. During the down trend there has been a clear pattern forming. There is a massive move lower followed by a sharp recovery up, but then it fades lower and has another massive move lower.
This repetition is almost like clockwork. Look at the circled areas (that I actually drew in yesterday following the spike higher) above to see the pattern. Each move lower is followed by a massive bar higher, and the pattern repeats. As soon as the volume drops off, the move higher always fails. I expect no different this time around. XRP, ADA, STR, as well as BTC and most cryptocurrencies made a big move lower about 5 hours ago and have been sharply recovering since.
As you can see by the arrow I drew in, the volume on this move up has been pitiful. There is no support to this rally, and I would expect the market to move lower.
A huge mistake many people make is trying to call the bottom in moves lower. The big V shape recovery entices people to buy in and think that the market has bottomed, but there is no reason to believe the pattern won't continue to repeat itself. Instead of buying into the spikes, I would recommend being patient and wait for a Volume spike to the upside. A bottom will not be set until we see a bullish candle with higher volume than the bearish candles that flush lower.
It is always better to wait for clear buy signals than to attempt to call a bottom and lose 20 points to the downside. I have been burned too many times calling tops and bottoms in the past, so learn from my mistakes and just be patient. Buy signs will show up soon enough, and we will be rallying once again. In the meantime, I am pretty confident in a short position for another leg lower here. Across the board there has been extremely weak volume, so I expect another leg lower.
Be careful making any trades in these kind of markets, unless you are looking for a long term investment! Thanks for reading! :)