After consolidating in a range for nearly two weeks, support finally broke and the bears succeeded in pushing price to new lows. Lets take a look and see if we can find out what's in store for Steem.
This analysis is on the STEEM/BTC pair on the 240 minute timeframe. Data provided by Poloniex and charted in TradingView.
Previous Analysis and Reflections
If you had been following my previous analysis on the STEEM/BTC pair you would know after the bullish deep crab completed we hit our first target and closed 1/2 our position. After taking profit we raised our stop loss to break even and let "the other half ride". Unfortunately, our stop loss was triggered at 0.0245 BTC and we were stopped out at break even for the remaining half of our position. Not bad, at least we took home some profit.
Although I could have exited my position earlier and banked more profit, this is not always the case. Sometimes my trade, after retracing, will breakout and hit the second target allowing for a nice return. Ideally, had I been monitoring STEEM/BTC more closely, I would have exited this trade once there was a break of the trend line.
Note to self: Pay more attention and take profit once the trend line is violated.
Where is Steem Heading?
As people see the price of Steem fall they might wonder... now that we have reached new lows where will price go? This is difficult to answer because we have no frame of reference, hence we have no idea where price will go... or do we?
This is where Fibonacci levels come into play!
Fibonacci Clusters as Support
While doing my analysis I found some key levels of support backed by Fibonacci price clusters. I found these levels by drawing multiple Fibonacci retracements, extensions and projections (please see chart above), and many of them converged in similar areas. This is called Fibonacci confluence, or a Fibonacci price cluster. This method is outlined in the book "Fibonacci Trading" by Carolyn Boroden, AKA the Fibonacci Queen.
These three distinct Fibonacci clusters could serve as key areas of support or zones to go long (or possible future downside targets if you are short) . Please note, that with such little data, low volume and susceptibility to extreme volatility, TA on this new instrument is limited. With time more defined support and resistance levels will develop and this pair will become easier to trade.
The Descending Channel
Another key area to watch is the bottom of the descending channel. I will be watching this area very closely if the bears manage to push price there. This area coincides with the second Fibonacci support cluster on my chart which is another reason to keep an eye near the 0.00165 BTC level.
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Case for the Bulls
As mentioned previously, Steem has been in a descending channel for quite some time and although it looks grim for the bulls there might be some light at the end of the tunnel.
Price is finding support at the first Fibonacci cluster. If the bulls can hold the price here and push it though the top of the descending channel we could see a possible breakout and a change of trend direction. If support fails we have more downside targets to look at for possible areas of support.
Please be advised, these Fibonacci clusters may provide decent spots to scale into a position but I would be cautious buying at this time because countertrend trading can be risky. One needs to be very decisive, and needs to get in and out of trades quickly to be a countertrend trader. This trading style requires one to watch the trade carefully and is usually left to the more experienced trader.
If I was a bull, it would be wise to wait for price to break out of the descending channel to get a clearer sense of direction before going long.
One last case for the bulls is oversold RSI.
RSI
RSI is currently in extreme oversold territory and is bound to start heading north soon. Also, RSI has recently retested lows, when this occurs we often see a quick reaction to the upside.
Case for the Bears
As mentioned earlier, we have been in a downtrend for quite some time. Until price breaks out of the descending channel, it is safe to say Steem is in bear country. Steem continues to trade below the 50 MA and 200 MA while we are witnessing "lower lows and lower highs". This is very bearish and the red arrows on my chart show possible downside targets.
Conclusion
For the time being the bears have gained control of the situation and have pushed price to new lows. With the bears printing "lower lows and lower highs" we are clearly in "bear country".
Now, I will sit on the sidelines, watch price action unfold, and look for a nice entry. If support holds at this current level I will consider slowly scaling in and then wait for the breakout at the top of the descending channel for confirmation.
If price falls further to the downside I will be watching the lower Fibonacci support clusters for price action and will look to see if support holds for a possible entry.
Updates will be posted in the comments section.
