July 25, 2021

Weekly Support Breakout - Technical Review July 21, 2021

Move below $ 30K in BTC / USD, weekly close on support in ETH / USD and how it can be canceled out the continuation of the fall in BTC / USD, as well as "altcoin trading for dummies" - in the next review from Cred and DonAlt, authors of the Technical Roundup mailing list.


Bitcoin: Weekly Close Through Support Level

Chart executed in TradingView

Chart executed in TradingView

Weekly candlestick in BTC / USD closed below $ 32.3K support

This is a bearish signal. Support has been lost and higher timeframes suggest that this 8-week range is being resolved by the continuation of the fall.

But before moving on to potential downtrend targets, let's be clear on what might disprove this bearish thesis.

Recall that the invalidation of an explicit bearishthe setup creates conditions for a bullish continuation. A break below $ 32.3k in BTC / USD is a clear bearish setup. Accordingly, if this breakdown is bought out and the rate recovers above $ 32.3 thousand, the bearish scenario will be much less convincing. As with any chart on any time frame, a failed support breakout and retracement into the range would be a very positive signal. In the case of BTC / USD, this implies a recovery above $ 32.3k.

Now, assuming that the breakdown is genuine, there are several points that would be appropriate to discuss.

First, of course, there is no benefit into immediately rush heroically to redeem the fall. A range recovery setup is much preferable to a buy-in-the-nowhere setup. The closest reasonable structure for a rebound is the daily support at $ 23,850. This is the level of the first consolidation after the breakthrough of $ 20K. Speaking of much more pessimistic scenarios, the monthly support in BTC / USD is about $ 14K. In any case, erroneous positioning now can significantly reduce your opportunity to participate in the market when it reaches truly trade worthy support. Wait for a clear structure.

Secondly, buying out a slow price drift is also notbest idea. In search of a bottom or any inflection point in general, it seems appropriate to wait for a really aggressive (and liquidation-fueled) move that will be offset by buying: panic or forced sells that end up in the hands of strong buyers. The market does not have to resolve in this way, but it can drift in a gradual decline for much longer than you can keep buying.

Finally, there is a significant difference between when the market forms a bottom (time) and so Where he forms it (price).The bottom does not necessarily imply a V-turn. It is likely that a trading range will form on higher timeframes, which will provide opportunities for positioning in the market for the next move. Many of those who bought BTC in the fall below $ 6,000 did not hold their positions due to the weak timing of their opening. If you are not prepared to withstand significant drawdowns and / or extended periods of uncertainty, then buy on signs of market strength.

Maybe these warnings will turn out to beirrelevant, the market will recover above $ 30K and the bullish scenario will be in play again. Then we will change our attitude. In the meantime, we consider it reasonable to prepare for a (downward) continuation of this breakout.

Ethereum at the mercy of bitcoin

Chart executed in TradingView

Chart executed in TradingView

In ETH / USD, the weekly candle closed above the support at $ 1800.

But taking into account the situation in BTC / USD, we do not see any significant grounds for optimism in this.

As we have written here more than once, the arguments in favor of a significant separation of the ETH rate from BTC are not yet convincing.

Simply put, Ethereum support is nothingmeans if BTC / USD breaks down. Technical analysis of ETH / USD, regardless of the obvious downward breakout of the 8-week range in BTC / USD, does not seem appropriate to us.

The levels below that could potentially be significant are $ 1400 (previous all-time high) and the previous trading range of $ 800-900.

As for the refutation of the bearish thesis, then,As the previous paragraphs suggest, the bearish scenario in BTC / USD must first be refuted. In this case, trying to play on a bounce in ETH / USD would make more sense. At the same time, in order to look constructive, the chart will have to recover and find support above $ 2000.

Altcoins for dummies

You must have noticed:altcoins have not piqued our interest lately. Most of them look frankly depressing and the largest cryptocurrencies are clearly in the wrong position for us to start substituting the altcoin markets.

This is a good opportunity to reformulate and revise the basics. And today we want to tell you about a fairly loose structure and basic assumptions from which we proceed when considering altcoins.

If the main cryptocurrencies (mainly BTC, but inrecently and ETH) are actively growing, then altcoins, as a rule, are growing even more. If major cryptocurrencies fall, then altcoins tend to fall more.

Altcoins are secondary to major cryptocurrencies. They can be thought of roughly as trading BTC or ETH with leverage.

Between major cryptocurrencies and altcoinsthere is a strong correlation. This is especially true for higher time frames or market cycles. With very, very rare exceptions, it is unlikely that your favorite altcoin will move in the opposite direction during weeks and months of declining markets.

Based on this, it should be clear why many traders first of all formulate a thesis on the main cryptocurrencies, and only after that they look at how and where to open positions on alt.

One of the common strategies is buyingaltcoins when the major cryptocurrencies, in your opinion, have reached support. The assumption is that there will be a rebound in BTC and ETH, and then the altcoins will bounce along with them, but with a greater amplitude. We are talking about more potential for a rebound at the cost of more risk if the thesis turns out to be wrong.

As for the choice of altcoins, that's all.a little more complicated. We usually try to stick to the most liquid coins with a larger market cap. They usually have fewer problems with the execution of orders of the desired size at the desired price, plus the actively traded altcoin futures market opens up additional opportunities for more creative positioning on it. Mid- and small-cap alts can rebound more, but the likelihood of worse order execution and liquidity evaporation is higher. There is also a risk that your altcoin will never recover at all.

Another useful aspect when choosing an altcoin isthis is its relative strength. Pay attention to which altcoins are showing more strength (or less weakness) when the market as a whole falls. These are good candidates for a strong bounce in market recovery. Relative strength, coupled with a sectoral approach (e.g., older altcoins, DeFi, exchange tokens, etc.) can make it much easier and more structured to find trading opportunities in the altcoin market.

To summarize, trading altcoins for the most partparts resembles trading BTC or ETH with leverage. This argument may seem archaic to some, but most of the counterarguments (by and large, depending on the significant delimitation of rates) did not stand the test of the market. Breaking down altcoin lists by their respective sectors, focusing on correlations, looking for relative strengths and positioning according to the situation in major cryptocurrencies are all important aspects of trading in the altcoin market that it makes sense to study and improve.

The article does not contain investment recommendations,all the opinions expressed express exclusively the personal opinions of the author and the respondents. Any activity related to investing and trading in the markets carries risks. Make your own decisions responsibly and independently.