Cryptocurrencies on January 12, 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 trade Ripple based on news.
  2. Bitcoin Cash’s range is very narrow.
  3. Dash continues to consolidate in a tight range.
  4. Bitcoin’s bubble depends on gold.
  5. Ethereum’s rally is completely intact despite the 2 day pullback

12:40 pm. Don’t trade Ripple based on news.
Yesterday I said that trend followers shouldn’t buy back into Ripple just because Ripple teamed up with MoneyGram. A bubble has zero correlation with fundamentals. Bubbles are purely driven by human psychology.
Ripple’s bounce on that news lasted 1 day. I expect Ripple to remain in a consolidation range like the other cryptocurrencies.

12:35 pm. Bitcoin Cash’s range is very narrow.
Like most of the major cryptocurrencies, Bitcoin Cash is in a consolidation phase. Wait for a breakout before buying.

12:30 pm. Dash continues to consolidate in a tight range.
Neither bulls nor bears have an advantage here. Wait for a complete breakout to new all time highs before buying.

9 am. Bitcoin’s bubble depends on gold
Bitcoin is trying to bounce off of its lower trendline.

A lot of traders think that Bitcoin will make a new all time high. I’m not so sure anymore.
Bitcoin and gold have a long term inverse correlation. Both are seen as alternative assets/currencies to the U.S. dollar. Bitcoin’s entire bubble since 2015 has occurred while gold has been suppressed.

The U.S. dollar is on the verge of breaking down, which means that gold will make a massive breakout sometime in the next few months.
I think Bitcoin’s bubble will pop when gold’s bull market begins (i.e. massive breakout). This will happen sometime in the next few months, which means that Bitcoin might not have enough time to make a new all time high.
9:41 am. Ethereum’s trend is completely intact 
Ethereum made a 2 day pullback, but it did not break below its 9 ema. Its uptrend is still intact, so trend followers should remain long.

Trend followers should get out when it starts to break down below key moving averages, e.g. the 9ema, 15 ema, or 20 ema. No one knows how far Ethereum’s bubble can go.

4 comments add yours

  1. Question: In this trend following strategy, what is a good basic rule to follow to take profits and start scaling out of a position? when do you know? Thanks.

    • Yif you want to scale out, you can try 2 moving averages. E.g. 50% Scale out when the $ breaks below 9 ema, then 50% scale out when the $ breaks below 15ema.
      The moving average you decide to use (9, 10, 11 etc) is completely up to you. I’m just using 9 as an example.

      • Thanks. And a good indicator of a false breakout/losing trade is trade going against you to 15 ema, right? That simplifies everything.

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