The beauty of trading is that when prices are correcting, there’s news of doom all around. All the bears come out of hibernation, forecasting a crash, and the bulls hide in a corner.
The exact opposite happens when price reaches lifetime highs. This creates fear in the minds of the traders who miss buying at the lows and selling at the highs. Therefore, we focus on the price action to forecast the next possible move. Now that Bitcoin is close to its highs, what should we do?
Traders who went long at lower levels on our recommendations have been booking profits near resistances. We are left with about 30 – 35 percent of our original position, which we had planned to book at $5000. Should we book out close to the highs, or wait for higher levels?
Yesterday, the cryptocurrency reached a high of $4932.9, very close to our target levels. However, selling at the highs has pushed Bitcoin back below the $4800 levels. As the digital currency is trading above $4680, chances are that it will again attempt to breakout to new highs soon.
If the bulls are successful in sustaining above $5000, the cryptocurrency is likely to gain momentum, and it will indicate the start of a new uptrend. Therefore, we recommend holding the existing position with a stop loss of $4500.
We don’t want to keep a deeper stop loss because, usually, when bulls fail to breakout of a strong overhead resistance, bears sell aggressively, sending prices lower. So, if the bulls fail to breakout and sustain above $5000, we can expect the bears to push the cryptocurrency down to at least $4184.6 levels, which is the 38.2 percent Fibonacci retracement level of the pullback from $2974 to $4932.9.
Traders who went long at $317 with a stop loss of $278 on our recommendation had to face a loss. In hindsight, it looks like we purchased at the highs of the range and sold off at the lows of the range.
However, we had intended to buy on a breakout of the range. As the range had been building for a few days, we believed that it would have enough force to carry it higher. Therefore, we didn’t recommend waiting for a close above the range to initiate long positions.
Similarly, on the downside, we’d expected that once the cryptocurrency broke out, it wouldn’t return to the lows of the range. Nevertheless, Ethereum proved us wrong on both fronts.
So, how can we trade Ethereum now?
Currently, the cryptocurrency is trading close to the center of the range. We don’t want to enter a long trade unless Ethereum breaks out and closes above $317. We may miss out on a few points, but at least we won’t be caught in these fake breakouts and breakdowns.
We shall keep an initial stop loss of $278 only, because, we don’t expect prices to fall back below the range, once it breaks out and closes above it.
We have been correct in avoiding Bitcoin Cash on the long side. On Oct. 9, the cryptocurrency broke below the critical support of $300, forming a low of $280.1. So, is this low level a good time to buy?
Bitcoin Cash is devoid of buyers. Though the digital currency has recovered above $300 levels, it continues to make lower lows and lower highs, which suggests that a bottom is still not in place.
Until the digital currency remains below $385 and the 20-day exponential moving average (EMA), it will continue to face selling pressure on rallies. On the lower end, Bitcoin Cash can fall to $285 and thereafter to $200 levels.
On the upside, any rally towards $385 levels is likely to face stiff resistance. We don’t find any buy setup on the cryptocurrency; therefore, we don’t have any recommendation on it.
The sharp fall on Oct. 9 hit our stop loss at $0.23500 on the 35 percent of our remaining position. This is the reason we always recommend booking partial profits as the price moves higher, especially when the cryptocurrency is not in a strong uptrend. Presently, we don’t have any positions in Ripple.
It has recovered after falling below the downtrend line on Oct. 9. However, bulls will face stiff resistance at $0.28000 and $0.30000.
On the downside, the cryptocurrency has support at $0.23000. Considering the levels, we don’t find a trade set up with a good risk to reward ratio. Therefore, we shall wait and watch until we get a good entry point.
There is nothing much happening in Litecoin. The cryptocurrency is stuck inside the range, due to which traders seem to have abandoned it at the moment.
Litecoin has a history of forming ranges and then breaking out of them. We’re currently in a similar situation. Whenever the price breaks out of the upper end of the range at $58, chances are that it will again take off.
Until then, the cryptocurrency is likely to trade between $44 and $58. We shall not take a trade inside this range.
Published at Wed, 11 Oct 2017 16:29:59 +0000