Welcome to market analysis from Darren Chu, CFA, founder of Tradable Patterns. Each week, Darren publishes technical analysis to help provide clues as to what might happen in the days ahead. Tradable Patterns also produces a daily newsletter on a subset of three CME/ICE/Eurex/SGX futures (commodities, equity indices, and interest rates), spot FX and cryptocurrency markets. For less experienced traders, tutorials and workshops are offered online and throughout Southeast Asia.
Bitcoin (BTC/USD) halted a two-week plunge this past week, tentatively drawing in short term bulls looking to play the bounce off last week's oversold levels. The daily RSI, Stochastics and MACD are all bottomish, but should be viewed within the context of ongoing fragility in the weekly RSI and Stochastics, which have yet to decisively bounce off oversold levels.
Significantly, the weekly MACD white line continues sloping down, warning short term bulls to take quick profits this week. A more sustainable bounce is more likely following a longer-term basing pattern that could last months given the magnitude of the November selloff (which unwound pretty much all of the rally from the second half of last year).
Ethereum (ETH/USD) also spent the past week halting its own two-week slide, and is showing early signs of trying to bounce off near the psychologically key USD100 whole figure level.
Given the bottomish daily RSI, Stochastics and MACD, and the early bottomish weekly equivalents, risk:reward is becoming increasingly favorable for bulls. With ETH/USD having unwound all of the rally from the second half of last year, bears looking to establish fresh shorts should be cautious despite not seeing any major horizontal support levels below current levels.
A successful recovery of ETH/USD to the 200 whole figure level would be rather bullish, but bulls will first have to contend with the downtrend resistance line (on the daily chart) connecting the December 2017 peak and this past November's high.
XRP (XRP/JPY) spent this past week halting the prior 2 week slide, and is trying to form a higher low versus the August and September lows.
With the bottomish daily RSI, Stochastics and MACD, XRP/JPY may not retest the 2018 low, especially if positive sentiment from the increasingly bottomish Ethereum (ETH/USD) lifts sentiment across the broader sector.
Before bulls become too excited, they'll want to see the same bottomish patterns on XRP/JPY's weekly chart, which could take months to form given the severity of the November slide.
This content is not financial advice and should not form the basis of any financial investment decisions nor be seen as a recommendation to buy or sell any good or product.