As predicted last week, the bullish momentum was just temporary.
The narrow rally that resumed yesterday following a shallow correction abruptly ended today in the cryptocurrency market, as the major coins suddenly got pushed lower as sellers retook control. The top digital currencies all lost around 10% compared to their recent highs, and most of them violated key support levels while breaking below the rising short-term trendlines as well.
As the recent rally didn’t change the bearish long-term setup in the market, the failed move is not a surprise, but the momentum of the sell-off has been unexpectedly strong in the slightly illiquid weekend environment. Ethereum’s failed breakout above $160 together with Bitcoin’s failed move above the January swing high triggered the plunge from a technical perspective.
The long-term setup still holds, but in the short term, I wouldn’t expect any major movements as the market will either consolidate for the next few days or continue the move downwards, below the 20-day EMA.
Bitcoin topped its January swing low before the crash, but it remained shy of its December high and the key $4,450 level of resistance despite yesterday’s clean breakout. The failed breakout pattern from the most valuable coin is a negative sign for the whole market, and it was unable to hold at the 50-day EMA level around $4,050.
While a move towards $4,450 is still possible with the rising weak short-term trendline still intact, the sudden violent sell-off and the still hostile long-term technicals warrant caution here even regarding short-term speculative positions.
The most notable winner of the recent bullish momentum was clearly ETH, topping the key $160 level. Unfortunately, the coin not only moved back below that level, but quickly passed the $145 support/resistance level as well. Much like with BTC, given the momentum of the decline, traders shouldn’t enter new positions here.
The long-term setup remains negative in ETH’s market, and odds continue to favor the continuation of the bear market. Even in the event of a quick recovery, traders should only consider smaller, speculative positions with strict risk management rules just as in recent weeks. The new support level is now near $130.
Ripple remains very weak compared to the broader market, and it fell together with its peers today despite missing out on the bulk of the counter-trend rally. XRP crossed the 20-day EMA and is now sitting back on previous monthly lows, around $0.30.
The $0.30 support/resistance level is back at the centre of attention, with a key resistance zone now ahead near $0.32. Traders and investors should stay away from the coin until we see signs of technical strength.
Litecoin has been showing relative weakness in recent days, and although it managed to hit marginal new swing highs, today the coin crashed below the strong $44 level amid the market-wide sell-off. While the coin was leading the way higher during the counter-trend move, the long-term setup remained clearly bearish, and odds still favor the continuation of the bear market.
LTC still trades below its 200-day EMA.
EOS turned lower after touching the target zone near $4.50, and despite the sharp sell-off, it remains above the steeply rising short-term trendline. Although the relatively strong coin found support near $3.50, traders shouldn’t enter new positions here, as today’s bearish momentum together with the negative long-term outlook point to increased downside risks.