In-depth technical anaylsis for Forex, Commodities and Crypto Currency!
Market Breakdown 12/07/2020
GBPUSD 20/05/2020 Analysis
We saw a slight revovery for GBP early on in the week making people believe GBP is now a buyers market. Last week the support level @1.21656 was taken out by the bears following 4 bearish days, creating a new low on the daily. The 30m chart began to look like a buyers market but we need to bare in mind the daily chart is beginning to trend down, you should try and not get distracted by the short term movements when analysing a chart.
On the 19th May we saw price retest a previous demand zone and reject, followed by another rejection today (please see chart below).
With GBP continuing to show weakness, i can see price potentially heading down to the 1.20 area. However we do need to keep an eye on price action and adjust to the market should we see a change.
With the halving behind us, where do we stand now?
From a high time frame perspective, price appears to be neutral (leaning on bullish). Following the local swing high in June 2019 price has been on a steady downtrend. It found support at the $6430 level before retracing and peaking at $10522, marking the quarterly range high. Following this was the crash which took price all the way down to $3858, although demand managed bring the monthly close to previous support at $6430.
In anticipation for the halving, the month of April managed to print a higher high and higher low, with a break in bearish market structure. Moreover, the massive volume from that month confirms that the trend has reversed, identifying the major cycle low by validating the change in order flow (from bearish to bullish). The month of May continues to push higher with higher highs and higher lows.
But, before jumping the gun, there are some barriers price must overcome before it can be definitively bullish. First, there is the monthly range high (April) at $9478 which has acted as strong resistance in the past. As of writing, price has pushed through it, but we must wait for a close as confirmation. Secondly, just above that there is the quarterly range high (Jan-March) at $10,522 which falls in confluence with the large psychological barrier of $10,000. So until price can reclaim these levels, we are still range bound.
Taking it down to the weekly, price looks more bullish than the monthly, although we far from being out of the woods yet. After 7 consecutive weeks of bullish price action BTCUSD finally had 1 red week, even though the bullish market structure did not break, since higher highs and higher lows were printed. Price was rejected at the $10,079 psychological level with that level becoming the weekly range high (and $8106 being the range low). This week, price found support on weekly range low and is now looking to test resistance at the weekly range high. As of writing, BTC/USD has broken through the April’s range high, although without a close above it (and the trendline), we cannot be confirm its significance.
The bear case on the weekly presents itself predominantly as strong supply zones. On one hand, price must still test supply at last week’s range high, and on the other hand, there is the more significant supply zone at quarterly range high at $10,522. In parallel, the significant volume from the past 2 weeks suggests that a minor/intermediate cycle high has been printed and a correction is due (not to mention that there has not been a break in bullish market structure since the lows in March).
On the daily, price looks even more bullish having closed above the descending trendline. Moreover, the 9 and 18 EMAs continue to stack. To note, however, this uptrend is not supported by much volume, so it is prudent to see how price will react to the supply zone at the weekly range high before proceeding.
Overall, I am neutral (leaning on bullish) because, firstly, the higher time frames are not entirely conclusive. The lower we go with the time frames, the more bullish price action appears to be – indicative of strength – but we cannot be get lost in the noise. The higher time frames should be used to inform directional bias. Secondly, BTC/USD has been correlated with the SPX and I am waiting for its reaction to the SPX correction to gauge my risk exposure. Despite data showing that the correlation is currently near negligent, I will still wait for the market’s reaction. These mixed signals take me out of out the market until I can define a better risk/reward scenario.
Though, I would like to disclose that I am mega-bullish in the long term for bitcoin when it comes to the long term. Firstly, with a global macro environment devaluing all major currencies (unlimited quantitative easing), in addition to the negative interest rate phenomenon, institutional investors are looking to other asset classes that do not – by default – extract their wealth. Most of this will flow to precious metals, as these markets can handle the liquidity, but it would be naïve to disregard the idea that a % of those outflows will go to bitcoin. Secondly, bitcoin is the best performing asset of the decade in the longest bull-run in American history. This speaks volumes when it comes to portfolio diversification as institutional investors look to the Sharpe ratio to help manage their risk. Thirdly, the stock-to-flow (and its updated cross asset model) indicates that bitcoin is right on track in terms of price. With the halving behind us, it historically suggests that the only way forward is up.
To conclude, the price action signals short term neutrality, but the fundamentals signal long term strength. Let’s see what next week has in store for us!
Is the trend changing with altcoins?
The past few days have seen a majority of altcoins trend upwards, with many remaining in a neutral range. This comes in conjunction with BTC dominance being rejected at a historical resistance level, printing a series of lower lows and lower highs. Moreover, many ‘heavyweight’ altcoins appear to have bottomed – forming multi week accumulation ranges – and some have printed very significant bullish divergences on the weekly timeframe, indicating that there is substantial buying happening behind the scenes.
We can see in the chart below that BTC dominance has broken the supporting trendline pushing it up to historical resistance around 70%. BTC dominance currently sits at 65%. For reference, in the last major altcoin cycle at the end of 2017 BTC dominance fell to 35%, showing that at current values, there is room for alt expansion.
So is it a time to be buying altcoins? Well, it is important to remember that cryptocurrencies are still a highly risk-on asset because of their volatility, and in a time of global uncertainty, high risk is not likely to be attractive to buyers. Bearing this in mind, whether it is time to buy depends on the trader’s risk profile and trading strategy. If the trader has a large risk appetite, they could benefit from entering the market now to scratch out some short term gains. More risk averse traders would benefit from being patient and waiting for more volume to come into the market expanding their time horizons (to note, BTC/USD is facing strong rejection from the 50 daily moving average which could result in a reversal. If this happens, alts will likely fall with BTC).
In any case it is a good time to be researching projects with solid fundamentals because it is right now that people are not paying attention to altcoins; when they are cheapest. Investors with a longer time horizon would do well do study cryptocurrency fundamentals in the view of accumulating for the next major market cycle. Traders who prefer shorter time frames might find it more worthwhile for the altcoin market to start trending to find setups matching their strategy.
Short-term Bearishness for Ethereum
Since ETH/BTC printed a local high at 0.0285 sats on 18th February, price has been in a steady downtrend marked by lower lows and lower highs. Price found some support at 0.02 sats, although the relatively low volume on the daily chart suggests that this level will only hold temporarily before reaching lower. This is because volume denotes participation, and at this price level there was not a sufficient amount of volume to reverse the bearish order flow.
Additionally, the first retest of the broken 200 DMA (red) resulted in an immediate rejection in the form of a bearish engulfing candle. In light of this, ETH/BTC is likely to dip towards and test the support between 0.0186 and 0.0179 sats, where price opened this year, to gather enough demand for the next cycle.
In any case, before entering long on ETH/BTC trade I will be looking for strong volume as well as a bullish cross of the 9 and 18 exponential moving averages on the daily to indicate a bullish reversal.
Why did Bitcoin drop this much, and where is it headed next?
The past few days and weeks have seen a sea of blood across all the board, in the equities, commodities, forex, as well as cryptocurrencies markets. Much of the narrative behind crypto markets in the past years supported the idea of Bitcoin becoming a hedge to the over-valued ‘traditional’ markets, suggesting that a percentage of its outflows would inflow to Bitcoin once the recession hit. But, it turns out, this has not been the case.
To the dismay of cryptocurrency advocates, on March 12, BTC/USD tanked straight through a 5 year trendline support. Price fell 42% – from $8000 to $4600 – resulting in the largest daily drop in Bitcoin’s history.
The spread of COVID-19 is undeniably to blame for this new record, as investors globally demanded cash to cover their positions. Simply put, the strong supply-side action in equity markets during the past few weeks cascaded into full-blown fear as prices plummeted, forcing an increasing amount of traders to liquidate their assets for cash. Invariably, among these liquidated assets were also cryptocurrencies.
But there are also other culprits who could have been responsible for Bitcoin’s crash. Firstly, cryptocurrency markets are still highly illiquid. For perspective, in a single day the top 10 richest people lost $78 billion, more than 50% of the entire cryptocurrency market capitalization – $152 billion (as of writing). So, relatively speaking, it does not take much capital outflows to tank BTC/USD, whose market cap sits at $96 billion. On top of this, more money is sitting on crypto derivative exchanges than spot markets, resulting in even more illiquid order books. So as margin traders started getting their stops hit, they also need to sell their other assets to cover their positions, leading to dramatic domino effects and pushing the price even lower.
Secondly, many reports suggest that PlusToken’s schemers executed their final exit scam. A well-known Chinese Ponzi scheme, PlusToken, has been looking to supply the market with their stolen Bitcoin’s for a while now. Many reports are suggesting that they also took part in the massive sell-side action clearing through the order books by selling their Bitcoin in order to exit the cryptocurrency market.
Bringing this all together, a combination of a global demand for cash, coupled with a very illiquid BTC/USD spot market, and a sell-off of 20,000 Bitcoins are likely what caused the record-breaking crash. With this in mind, where do we stand now in terms of BTC/USD’s price action?
In the long term, there is still reason to be bullish. On one hand, as the global negative-yield problem grows by the day, people will increasingly be looking for assets where they can put in their savings without having to pay interest just to have it. On the other hand, Bitcoin’s halving event will take place sometime in early May – marked by the vertical red line – where the amount of Bitcoin’s being sold into the market by miners will be cut in half. Ultimately, only time will tell if these catalysts will succeed in brining fresh demand for cryptocurrencies in the coming weeks and months.
In light of this, strong demand zones on the monthly and weekly timeframes can be found between $4000 – $3300 and $2900 – $2400 (green boxes). The largest demand zone formed from a previous accumulation zone, where price ranged for nearly 5 months before breaking to the upside. The second demand zone is smaller – visible on the weekly timeframe – and it is notable given Bitcoin’s infamous volatility and that it’s BTC/USD last major support before entering in triple digit territory.
In the short term, BTC/USD has formed a range between $4500 – $5600 and it will have to break above either of these levels with strong volume to indicate the continuation of the downtrend or a potential reversal. Keep in mind, once a reversal occurs, it will not be an easy way up. BTC/USD will likely face heavy resistance from pivot zones around $6300, $7160, and $9330, since these are strong monthly (and yearly) resistance levels. At this rate, it is likely to drop to and continue accumulating in the first demand zone before a retest of the $7165 resistance zone.
To conclude, if you are an investor in the long-term potential of cryptocurrencies, this is a time to be dollar-cost-averaging into Bitcoin, and not selling. If you are a trader and look at cryptocurrencies on smaller time-frames, manage your risk accordingly. In times of uncertainty it is vital to remain patient.
Following a short consolidation period BTC/USD has broken to the upside, but where is it headed next?
From the 22nd of November to the 4th of January, BTC/USD entered into a consolidation period after correcting from the local high just under $14 000. After gathering some strength price broke out with supporting volume, and is currently sitting at $9330.
In this price action, BTC/USD pierced through several key resistance levels. The previous range high at $7800 as well as the 100 daily moving average (DMA) were flipped from resistance to support (which invited even more demand to push the price higher). After a brief consolidation price jumped again, but was rejected by the 200 DMA on its first attempt. Only after retracing to the demand-turned-supply zone at $8100 did price garner enough strength to break the 200 DMA resistance level.
Both the 100 and 200 DMA have had a strong influence on BTC/USD’s price history – often serving as support and resistance – and for this reason can be considered at a pivot point. If price can consolidate above the 200 DMA and maintain its bullish market structure, a test of the $11 000 resistance level is likely.
However, a lower time frame perspective suggests that price will first retrace before moving upwards. The H4 has printed a hidden bearish divergence, which occurs when price makes a higher high but the RSI makes a lower high. This suggests that the bulls are losing momentum to keep pushing the price higher. In this light, a retest of the 200 DMA (which coincides with the $9000 psychological level) should be considered.
Nonetheless bulls should not fear, for market structure continues to remain bullish on the higher time frames (daily and weekly).
Could the Euro-Pound (EURGBP) be on the rise? The candle from Friday has rebounded with a large wick to close in the green. There are several interesting support and resistance zones to look at for this market.
The market EURGBP is one of the major forex (foreign exchange) pairs. This exchange rate is exactly what you are buying or selling when you go on holiday from the UK to Europe. If you apply some basic trading analysis, you could save yourself some cash next time! I personally will watch exchange rates for at least a month before I’m going on holiday to see when might be a good time to buy.
Let’s look at the recent trends. In the last month or so, the price has consolidated between 0.839 and 0.859, as you can see from the horizontal blue and purple lines on the chart. It did briefly drop down to test the support from December 2016 and April 2017, but rejected as shown by the orange demand zone around 0.830. This level appears to be very strong and has held on three separate occasions now; it will take significant selling power to break through it.
The nice ‘M’ shape formed of two recent highs provides an indication of the next resistance level on the upside, as the price has rejected at 0.859 twice already. Hence, we can draw the two dotted arrows as an educated guess to where the price may move in the coming week. If there is continued buying power from the end of last week, we may see the price test that 0.859 level for the third time. If the price starts in the red and drops below the low from Friday, we could see the price drop into that orange demand zone again and make another retest of the 0.830 level.
On a longer term basis a bullish view could push the price all the way back up to the purple supply zone at the top of the chart, or we could see a big fall below the bottom demand zone. It is too difficult to say which direction it will go, as the significant news on Brexit coming at the end of the month will likely force the exchange rate in a particular direction.
I personally am looking for another green candle to start the week, to give an indication of a nice bull run up to the 0.859 level or beyond. Hope you have a great week, and happy trading!
Nice rejection on the weekly chart for Wheat! This week we have had a high of 5.92 on Tradingview (broker charts may have a different price), but price has fallen back to the 5.79 area similar to the high from the end of July 2018. It’s clear from the chart that this level has failed to push higher several times before, especially with the blue highlighted supply zone. Will Wheat now fall back down to the 4.15 level?
Wheat is known as a soft commodity. This means that it is grown as a crop rather than being extracted or mined (e.g Oil is a hard commodity). The result of this is that the fundamental price of wheat and all soft commodities is heavily affected by how good the crop grows, which is primarily affected by the weather. However, support and resistance levels, as is clear from the chart, are still important factors that affect the balance between buyers and sellers. There will always be a demand for Wheat, since it is the primary ingredient in bread – and every country in the world makes bread! Russia is the world’s leading exporter at this time, but many countries have large Wheat production.
From a fundamental point of view, the USA’s WASDE (World Agricultural Supply and Demand Estimates) report is an important indicator of the overall direction for the commodity over the year. Crucially, the January WASDE presented a bullish message for the Wheat market; it stated that “the outlook for 2019/20 US Wheat is for stable supplies, increased feed and residual use, and lower stocks”, and on a global scale it stated “With foreign supplies falling and total use increasing, foreign ending stocks are lowered 1.2 million tons to 261.8 million.” Lower supplies and increased demand should put increasing upwards pressure on the price. This is a high level picture though, and on the shorter term there are some significant technical resistance levels.
The weekly chart attached shows several clear peaks where the price of Wheat has spiked and failed to hold onto the high level. There is a fresh supply zone, indicated by the blue band, which has not been touched since July 2015. The price has not traded within that range for over 4 years! With the recent rise in price since August 2019, Wheat has begun to sneak into this supply zone. However; there has been a large wick on the most recent weekly candle, suggesting that there is some selling power preventing the price from going any higher. If there is an increase in volume, we could see the price come crashing back down to the level shown on the chart.
What would I look for? If there is going to be a significant fall in price, there first needs to be an increased volume with a couple of red candles. Once it starts moving back down, there is plenty of space all the way to the identified 4.15 level. Conversely, for long positions I would wait for at least the significant zone from 2015 to be broken – the price could find resistance and collapse at any point in this range.
Do you consider Wheat in your trading? With the planting season approaching, it will be interesting to see where this one goes!
Ethereum has been trending bearishly for the last two years, but there are signs suggesting the bottom could be in. The higher lows on the weekly timeframe invite the notion that a reversal might be in coming, especially since there is strong supporting volume.
But this might not be sufficient to suggest a major reversal is coming. ETH/BTC is still facing resistance between 0.018859 and 0.019292 sats, from previous swing low and trendline resistance levels. This confluence indicates the zone will act as a strong supply zone.
It will be important to keep an eye on the weekly close to indicate how the market may trade next week. If price finds support on the (or in) the range and consolidates its gains, these will be signs the market wants to climb higher.
On the daily chart, price action appears to be consolidating between the 50 daily moving average (DMA) in green, and the 100 DMA in yellow. If price manages to break above these resistance levels and consolidate its gains, this would indicate the bulls are increasingly taking control.
On the 4h timeframe, price action has made its second higher low at 0.018859. Price appears to be reaching the 50 HMA, and unless it finds support on it – with strong supporting volume – it will not likely breach resistance. If ETH/BTC does not find higher highs, the bulls will likely form demand zones at the following levels: 0.018923, 0.018859, 0.018502, 0.017518 sats.
This is a decisive moment, and especially for the altcoin market since Ether has the tendency to dictate the sentiment of the altcoins; the rising tide lifts all boats.
BTC/USD has been on a steady downtrend since July 2019, although it appears that the New Year has raised its spirits.
On January 7th BTC/USD broke through and consolidated above the channel resistance for the first time since mid-2019. If price can bring in further momentum, then is likely that the local bottom at $6431 has already been found.
The broken resistance level was met with supporting volume, suggesting that the market wants to move higher. Price broke and consolidated above the supply zone between $7800 and $8000, before reaching higher. BTC/USD is currently ranging between $8500 and $9000.
If the support level holds, bulls would see it break through and close 200 daily moving average to indicate continuation, given it is a strong supply zone (in the form of resistance from flipped support and resistance levels, and the 200 daily moving average).
But it could also fall through the support area in green. If this happens, a retest of $7500 – $7800 is likely. If this support does not hold either, risk-averse traders should looking to long from a retest of the channel bottom.
An important consideration at this point is the potential cup and handle formation. If price successfully retests the demand zone at $8250 following a rejection at $9800, traders will be looking for a breakout of the formation to continue the uptrend.
Also, from a cyclical it appears that BTC is in a relatively low-risk investment period. It is currently sitting at the bottom of the channel where it has historically always found support. Although since tops and bottoms are generally met with large volume, especially in crypto markets, risk-averse traders would wait for supporting volume for further confirmation.
Gold has spiked up to its highest level for 6 years! The market has been in a bullish trend since the middle of 2018, but recent political events with Iran have caused fear among traders leading them to rapidly push the price of Gold up due to its “safe-haven” reputation. It will now be interesting to see what happens next. Let’s take a look at some technical analysis.
Starting with the daily time-frame, there had been a period of consolidation from September right up until the middle of December when the price began to rise significantly. The market broke out of the Bollinger band on 26th December, followed by a few days of small gains. These were likely due to the low volume over the Christmas to New Year period. As soon as January arrived, the volume greatly increased and with that the price smashed higher. On the way up it has broken through the significant level of 1540 from 2012 lows (pink line on the chart) and the high of the year 2019 at 1560 (circled in black). Looking at the moving averages, we see that the more reactive 45 day moving average is slightly below the longer-term 60 day moving average; this gives an indication that the market sentiment may be in transition from bearish to bullish, as the shorter moving average is likely to cross the longer one in the coming days. The third circle on the chart highlights the big wick on the candle of the 8th January. This is a sign of caution for bulls, with the price seeming not to want to push higher than around the 1600 level.
It’s important to check the price action on higher time-frames. Switching to the weekly chart shows us that the recent high at 1600 corresponds with a small peak from March 2013. It is also clear to see that the pink support line at 1540 was formed from three separate tests of that level in 2012; when the price broke below this support it rocketed down. It is also interesting to note that, even though there’s a big wick, the past week’s candle has still been in the green, with a 0.42% rise. One thing to remember in swing trading is that the trend is your friend, and historically the biggest moves occur after the longest consolidation periods. The weekly gold chart shows a consolidation zone from 1050 to 1400 that has been adhered to for the past 6 years; the fact that this has now been broken is very significant from a technical perspective.
Although our focus is always on the price action and technical analysis, it’s important not to forget the fundamentals that also drive trader bias. In the past week, fear of escalation of the situation in the Middle East contributed to a rush in buying Gold. When the tensions had relaxed, the price pulled back to around 1540. The USD weakness from a disappointing Non-Farm Payroll (NFP) on Friday allowed buying power to respond at the end of the week; Gold typically follows the inverse trend to the dollar. With the revelation that Iran did shoot down the passenger plane killing hundreds of civilians, could the tensions be again increased and subsequently Gold price be pushed higher?
If we look ahead, there are a couple of key considerations. The weekly price closed above two significant levels, being the pink long-term support from 2012 and also the recent 2019 high at 1560. This is positive for the outlook to the week ahead, but concerns arise from the large wick on the 8th. As usual, confirmation is key; the market still looks bullish overall but how much further can it really go? I would look to the orange line at 1617 as the next significant level on the upside, and the pink support line as the next significant level on the downside. Have a great week, happy trading!
Coffee analysis 23/12/19
Trading made simple, if only these trades were available everyday! If you’ve got the discipline then you could sit back and just pick trades like this! Don’t get caught trading a sideways market!
I spoke about Coffee earlier today and mentioned I fully expect the price to drop so I’ll bring you some analysis on the reasoning behind it!
Let’s start by looking at Coffee on the weekly chart, it really doesn’t get much clearer when it comes to trading. Just take a look at the previous 2 weeks, those rejection candles are huge! Why did we have these 2 rejection candles and where were they rejecting from? Well take a look at the chart and you’ll see they were rejecting from the 145-150 supply zone. When you see 2 huge rejections like this I’d say there is at least a 80% probability we will see a change in direction.
We have now headed back into the 126-129 demand zone where we could see price stay for a couple of days or we may see momentum carry price down to the 120 demand zone.
So why did I take on today’s trade? Well it’s simple really! When you check out the opening 30m candle there was clear intent from sellers that they want to take price lower, just check it out! Also check the volume!
Not only did we have intent on direction from sellers early on we also had a rejection of the 130 area! We also had the weekly rejections along with our daily moving average cross!
Check out this nice clean Copper chart!
We have seen Copper rally ever since price headed lower in August and on 3 attempts failed to break through the lower demand zone throughout September and October. We have now reached a key supply area at the 2.80 level, I believe if we see a weekly close above this zone then price will rise and test that all important psychological level @3.00 however on the other hand if we fail to break and hold then I see price falling back down to the lower demand zone over the coming weeks.
Remember to only take a trade when the level gets rejected or broken. Keep risk to reward in mind at all time and don’t take a trade for the sake of it!
Since BTC dropped quite significantly in the past it has regained some strength breaking above the support area marked in green. It found support on the lower boundary of the channel, and by the looks of recent price movement, a retest of the upper boundary seems likely.
Many people are saying BTC is in a bear trend and they are right, since price has corrected over 50% in the past few months. But it cannot be discarded that the descending channel does support a maintain market structure, in the sense that price is in a ‘healthy’ correction. I say ‘healthy’ because BTC broke out of the accumulation phase in 4/5 months and exploded 250%, and at the current standing BTC is still +50% in up.
So the way I see it is that BTC has dipped into a key pivot point which served as a support level through the bear market. If the zone holds, then we will likely test the top of the channel again (and the 50 and 100 DMA marked in green and yellow, respectively).
If it breaks and there is a daily close below the zone, I will be looking to short.
Here is an update on the Soybeans trade that I mentioned first a week ago. This is a daily time-frame with a 45 Simple Moving Average and 60 Bollinger Band. As you can see, the price has continued to rise in the last couple of days and is now trading at the 9.2 level in the range of the candles from mid-October / early-November. I’ve highlighted the key points that signalled the start of this mean reversion. First we saw the breakdown of the bear market with the undecided candle with a large wick on 2nd December and the subsequent ‘Doji’ neutral candle on 3rd December. Then, on 4th December the bullish candle closed the day back inside the Bollinger Bands. Added to this, the shorter term 45 MA was above the 60 MA; this is the sign of the start of a mean reversion. Sure enough, we have since pushed up to and beyond the mean, a great trade and perfect example of this type of trend!
We have just tested a key daily timeframe supply area and seen a nice rejection of the 1.34 psychological area with an increase in volume. I believe we will now more than likely see a shift in momentum and turn bearish. I’m now expecting price to head down to 1.29700 before heading even further to the 1.26/1.26500 demand zone.
Something for you all to look out for…. Volume will play a big part in determining when a trend starts and ends, now its not going to be 100% fool proof but it gives a huge indication. Just look at this audjpy chart, when the volume begins to drop so does the trend, we then have a huge increase in volume when we change direction.
Market watch 2/9/19
Trade analysis 22/8/2019
The week ahead 4/8/19 – GBPAUD, GOLD, NDQ100, DAX, EURAUD
Gold NFP 2/8/19
AUDUSD Analysis 30/07/2019
EURCHF Analysis 22.05.2019