by Dan Clarke, MAX Institutional Sales
DISCLAIMER; This post and its contents should in no way be considered investment advice.
After highlighting the building blocks for a bounce in last week’s commentary, the market did not disappoint, with overall crypto market cap +26%~ over the last 7days with outperformance led by BCH+147%, BCHSV+61%, EOS+49% & TRX+44%.
So what are we expecting looking into next week?
Overall there seems to be this common fallacy that the violent move off the recent bottom was too much too quick & hence argues for a retest of the recent lows. The reality as highlighted in this week’s post on MAX Medium blog “Bear Market Bottoms Have a Lot in Common” is that after looking at the trading patterns of many significant bear market bottoms, that a short sharp rally is very typical at the bottom of a correction. Technically this makes sense because on the final capitulation, so little time is spent trading at any one level resulting in no meaningful levels of resistance on the upswing. In the cases we observed (Nasdaq 2002, SARS 2003, GFC S&P 2009, Bitcoin 2015), the initial short sharp rally is typically followed by a period of consolidation before a further move higher.
I think the most likely scenario over the next 2–3 days is down BUT still higher over the next week. The caveat is that I believe Bitcoin needs to hold 3800~ on this pullback, otherwise risk a retest and likely break of recent lows & a possible test of the 2300–2800~ range (Which I think should act as VERY strong support given the 73~ days we spent consolidating around this level back in May-July 2017, the 3rd longest period of consolidation over the last 2 years). The shorter this period of consolidation in the coming days, assuming we hold 3800~, the more I believe we have put in the cycle lows already. The longer the consolidation the more risk we ultimately break lower.
So assuming we are right in the call to hold support here, where is our next target? The first key resistance is probably 4500~ & then 4800~ & I personally think this range is very significant given the 60days~ Bitcoin spent around these levels back in Aug-Oct last year (4th longest period of consolidation over last 2Yrs) . If we were able to get through that, 5600~ maybe possible (The 100Day MAVG but also a key level of support that was tested and held several times during the Oct-Nov 2017 timeframe).
It’s worth remembering that we closed last week with a 60Day ROC at -50%~ which has only triggered 3 times in the last 4 years & delivered an average rally of 91%~ (Which coincidentally would put us back at 6300~, a price level around which we saw the longest period of consolidation over the last 2 years). Underpinning this idea of technical support just below this level would be Bitfinex margin shorts which remain elevated (13% ~off all time highs & +84%~ from the November lows, whilst longs are down 27% ~from recent highs & +29%~ from Oct lows suggesting sentiment remains subdued and tilted towards the “dead cat bounce” end of the spectrum).
DISCLAIMER; This post and its contents should in no way be considered investment advice. We may individually hold positions in some of the assets we discuss. Any projections, conclusions, analysis, views are to be considered hypothetical & for informational purposes only & not meant as recommendations for investment. Anyone considering an investment in crypto should only invest what they can afford to lose. You alone are responsible for evaluating the risks & merits of our content.
