Investors are returning to cryptocurrencies following the recent rally that briefly took bitcoin above $8,000.
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Market data is provided by the HitBTC exchange.
Bitcoin rallied about 101.55% between April 2 and May 14. This sharp rally after a long bear phase surprised many, including us. Analysts at JPMorgan Chase have said that, after the rally, Bitcoin is trading above its intrinsic value. They find some similarities in the current rally to the one in late 2017.
However, we believe that a rally of such a magnitude was necessary to change the sentiment from sell on rallies to buy on dips. Fundstrat Global Advisors co-founder Tom Lee tweeted that the bear market is over. In a recent conference, he cited 13 reasons that indicate the end of the bear phase.
The recent upsurge in prices has attracted investors back into cryptocurrencies. The trading volumes at the centralized exchanges skyrocketed in April. Notwithstanding, we do not expect a vertical rally from current levels. It is likely to be a gradual up-move. We may witness one more round of selling that will shake out the weaker hands before starting a sustained uptrend.
Bitcoin (BTC) held the 20-day EMA and rebounded sharply on May 19. However, the bears are mounting a strong defense at the overhead resistance of $8,496.53. If the bulls fail to scale this level, the digital currency might remain range bound between the 20-day EMA and $8,496.53.
A breakdown of the 20-day EMA can drag the price down to the next critical support of $5,900. We expect this level to hold.
On the contrary, if the bulls scale above $8,496.53, the BTC/USD pair can rally to the next target of $10,000. The trend is bullish as both the moving averages are sloping up and the RSI is close to the overbought zone. However, we do not find any reliable buy setups yet, hence, we are not suggesting a trade in it.
The drop in Ethereum (ETH) took support at $225.39. This is a positive sign. Both the moving averages are sloping up and the RSI is in positive territory. This suggests that the bulls have the upper hand. The digital currency will now try to move up to the $300–$322 resistance zone.
On the other hand, if the ETH/USD pair plummets below $225.39, it will lose momentum. The trend will weaken if the 20-day EMA breaks down. Therefore, if the traders hold some long positions, they can raise the stop loss to $210. They can keep trailing the stops just below the 20-day EMA. Others, who have already closed the long positions can wait for a new buy setup to form before entering again.
Ripple (XRP) triggered our buy levels recommended in the previous analysis. Though the digital currency bounced on May 19, the bulls could not sustain the higher levels. It has again dipped towards the 20-day EMA, which is an important support to watch out for.
Conversely, if the pair bounces off the 20-day EMA and scales above $0.45, it is likely to pick up momentum and move up to $0.60. Though there are minor resistances at $0.50 and $0.55, we expect them to be crossed.
Bitcoin Cash (BCH) rebounded from the 20-day EMA, which is a positive sign. The trend remains bullish as both the moving averages are sloping up and the RSI is above 50. On the upside it is facing selling at the resistance line of the channel. If the bulls fail to break out of the channel, the digital currency might still move up gradually as long as it stays above the 20-day EMA.
The first sign of weakness will be a break below the 20-day EMA. After that, a drop to the support line of the channel is probable. A breakdown of the channel will change the trend in favor of the bears. On the other hand, if the BCH/USD pair breaks out of the channel, it can pick up momentum and rally to $600.
Litecoin (LTC) bounced from the first support and scaled above $91 on May 19, but it is struggling to stay above this level. It is again back below $91 and might retest the support at $84.3439. The 20-day EMA is also just above this support. Hence, this is an important level to watch out for.
If the LTC/USD pair slides below $84.3439, it can fall to $74.6054. If this support also gives way, the pair can drop to $66.47.
On the other hand, if the bulls propel the digital currency above $91 and sustain it, a rally towards its target objective of $158.91 is probable. Hence, the traders can keep the stop loss on the long positions at $70.
EOS found support just above the 20-day EMA, which is a positive sign. Both the moving averages are trending up and the RSI is in the positive territory. This suggests the bulls have the upper hand. However, they are currently finding it difficult to push the price above $6.8299.
A failure to scale above $6.8299 will result in a consolidation for a few days. The EOS/USD pair will weaken on a breakdown of the moving averages. In such a case, a drop to the bottom of the large range at $4.4930–$6.8299 is probable. The trend will turn negative if the pair dips below the $4.4930–$3.8723 support zone.
Binance Coin (BNB) made another new intraday high on May 19 but failed to break out of the resistance line. This is the fourth time the digital currency has turned down from this resistance.
The BNB/USD pair might now correct to the 20-day EMA, which is likely to act as a strong support. A break below the 20-day EMA will weaken the momentum and if the pair slides below the 50-day SMA, it will signal a deeper correction.
The trend remains up as both the moving averages are sloping higher and the RSI is close to the overbought zone. If the bulls break out of the resistance line, it is likely to pick up momentum.
Stellar (XLM) has been consolidating near the overhead resistance of $0.14861760 for the past six days. The dips have been bought by the bulls, which shows demand at lower levels. If the digital currency breaks out and closes (UTC time frame) above $0.14861760, it can rally to $0.22466773. The 20-day EMA is sloping up and the RSI is in the positive zone, which suggests that the bulls have the upper hand.
Traders can buy on a close (UTC time frame) above $0.14861760 and keep a stop loss of $0.1150. Contrary to our assumption, if the XLM/USD pair fails to climb above the overhead resistance, it might remain range-bound between $0.1150 and $0.14861760 for a few days. The pair will weaken if it breaks below the moving averages.
The bulls are finding it difficult to propel Cardano (ADA) above the overhead resistance of $0.094256. Now, the bears will attempt to sink the price below the moving averages. If successful, a drop to $0.057898 is probable. If this level also breaks down, the trend will turn negative.
However, if the ADA/USD pair rebounds off the moving averages and climbs above the overhead resistance of $0.094256, it will complete a reversal pattern that has a target objective of $0.161275. The moving averages are sloping higher and the RSI is just above the midpoint. This shows that the bulls have a minor advantage. Therefore, traders can initiate long positions based on our previous recommendation.
Though Tron (TRX) rose above $0.02815521 on May 19, the bulls could not sustain the highs. However, the positive thing is that it is clinging close to the top of the range. If the sentiment remains strong, we anticipate another attempt by the bulls to break out of the consolidation.
If the TRX/USD pair sustains above $0.02815521 for 3 days, it is likely to start a new uptrend that can easily carry it to $0.40 where it might face some resistance. The pair has spent a long time in the range, hence, the next leg of the up-move is likely to surprise on the upside. Above $0.40, the rally can extend to $0.50.
Our bullish view will be invalidated if the cryptocurrency fails to sustain above the range. In such a case, the range bound action will continue for a few more days. For now, traders can maintain the stop loss on the long positions at $0.0209. We will raise it at the first available opportunity.
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Author: Rakesh Upadhyay
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