Cryptocurrencies on February 6, 2018: outlook


*I don’t trade cryptocurrencies. The best strategy for trading a crypto bubble is a classic trend following strategy.
Here’s my outlook for various cryptocurrencies based on the aforementioned strategy.

Discretionary outlook based on charts

  1. Don’t chase the bounce in Bitcoin, Bitcoin Cash, & Ethereum
  2. Don’t catch the falling knife in Ripple, Litecoin, Dash, or IOTA

3:26 pm. Don’t chase the bounce in Bitcoin, Bitcoin Cash, & Ethereum
Bitcoin is trying to reclaim its 200 daily moving average. All 3 of these cryptocurrencies are very oversold.



Bitcoin and other cryptocurrencies will eventually make a big bounce. But where? It could be here, or it could be after Bitcoin falls below $5000. The point is, nobody knows when cryptocurrencies will make a bear market rally. Trying to catch the falling knife in a bear market is extremely dangerous. Bear markets are much harder to trade than bull markets.
Hence, trend followers should wait until Bitcoin makes a new all-time high before buying. Otherwise Bitcoin’s bubble is officially dead.
These cryptocurrencies are still making lower highs and lower lows. There isn’t even the slightest sign of a sustainable reversal yet.
4:30 am. Don’t catch the falling knife in Ripple, Litecoin, Dash, or IOTA
Ripple, Dash, and IOTA have broken below their 200 daily moving averages. Litecoin has reached its 200 daily moving average.

  1. All 4 of these crypocurrencies are very oversold.
  2. All 4 of these cryptocurrencies have a bearish pattern of lower highs and lower lows.





A lot of traders have gone long at Bitcoin’s and alt-coin’s 200 daily moving averages. One of the best crypto traders I know expects Bitcoin to bounce to $12,000. I don’t think going long is such a good idea.
If Bitcoin’s bubble is over, then there’s no telling how low cryptocurrencies will go before they make a tradeable bounce. Catching the falling knife in a bear market is EXTREMELY DANGEROUS, especially since the decline so far has been rather orderly. There has not been a massive one day crash that’s typical of most bear market downlegs. If Bitcoin and other cryptocurrencies had a massive one day crash (e.g. >33%), then I would expect a sizable bear market rally.

Remember: RSI can fall to single digits in a bear market. Oversold can become more oversold.
Cryptocurrencies might make a bear market rally right now, or they might continue to fall. The risk:reward profile does not support bulls right now. It’s a 50-50 bet.
Read Cryptocurrencies on February 5, 2018.

1 comment add yours

  1. Thank you Troy . It is true that a grinding slowly lower is more bearish than a brutal drop .

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