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Last week, cryptocurrencies plunged following news of the Chinese crackdown. Though the fall was sharp, it was short lived. Lower levels gave an opportunity to the eager bulls to make an entry.
So, has the correction ended and will digital currencies again resume their gravity-defying run? Should you jump in right away or will the cryptocurrencies retest last week’s lows?
Let’s look at the charts and find out.
We expected Bitcoin to pullback to about $3200 levels, but it never dipped below $3500.05. This shows that there is enough buying support at lower levels.
Nevertheless, after the pullback of the past four days, the digital currency has reached the 50 percent Fibonacci retracement level of the fall from $4975 to $2974, which should act as a resistance. Additionally, Bitcoin is likely to face resistance between the $3955 and $4100 levels, from both the moving averages and the downtrend line. We don’t expect the digital currency to climb back to its lifetime highs in a hurry.
We expect some kind of a consolidation or a minor pullback towards the recent lows once again. However, if the price continues to rally and breaks out of both the moving averages and the downtrend line, we will throw in the towel and quit looking for a pullback.
Ethereum never pulled back to our buy levels of $220. The lowest it fell to was $238.98 levels yesterday. The digital currency has broken out of the descending channel, which is a positive sign.
Currently, Ethereum has reached close to the 50 percent Fibonacci retracement levels of the fall from $409.42 to $200.15, which should offer stiff resistance. Additionally, we expect the digital currency to face resistance from both of the moving averages. However, if the next pullback doesn’t fall below $250 levels, it will indicate significant strength and we shall look for buying opportunities.
However, we don’t find any attractive buy setups at the current levels.
Bitcoin Cash has bounced a whopping 64 percent from its lows. Currently, it is likely to face resistance from the 50-period simple moving average (SMA), and the psychological barrier of $500. Above the moving average, the cryptocurrency can rally to the downtrend line at about $580 levels.
On the other hand, if the digital currency is unable to breakout above $500, it can fall to $400 levels. As we don’t find any attractive setups, we are not recommending a trade on it.
Ripple has pulled back close to $0.19300, where it has a confluence of resistances from the moving averages and the downtrend line.
We shall change our view only after a breakout and close above the downtrend line of the descending triangle. Until then, we remain neutral on Ripple.
Even after the pullback from the lows, Litecoin is currently trading below both the moving averages and the downtrend line. It has a number of resistances between the $56 and $68 levels.
Therefore, we believe that the risk to reward ratio is not favorable to enter long positions now. We shall wait for a suitable set up to form before recommending any trade.
Note from the author:
Though all the top five cryptocurrencies have rebounded sharply from their lows, we expect some kind of a consolidation or correction within the next few days. Therefore, we are not recommending any trade today as buying at the current levels is risky.
*Bitcoin, Ethereum and Litecoin charts are provided by HitBTC exchange.
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