Cryptocurrencies on January 28, 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. NEO is the strongest cryptocurrency.
  2. Cardano is in a consolidation pattern.
  3. Stellar Lumens is starting to make higher highs.
  4. Ripple’s 9ema has turned from support into solid resistance.
  5. Dash, IOTA, and Litecoin are all making lower highs and lower lows.
  6. Bitcoin and Bitcoin Cash are making lower highs.
  7. Don’t chase Ethereum’s bounce.

3:40 pm. NEO is the strongest cryptocurrency.
Unlike other major cryptocurrencies, NEO’s multi-week trendline support is still intact. The correction in other major cryptocurrencies caused NEO to enter into a consolidation pattern. Trend followers should buy NEO once it makes a new all-time high.

3:36 pm. Cardano is in a consolidation pattern.
Cardano is in a consolidation pattern, with higher lows but lower highs. Trend followers should wait for a breakout to new all-time highs before buying.

3:32 pm. Stellar Lumens is starting to make higher highs.
Unlike the other major alt-coins, Stellar Lumens is starting to make higher highs. However, we don’t know if a continued decline in other cryptos will eventually drag Stellar down. Hence, trend followers should wait until Stellar makes a new all-time high before buying.

3:09 pm. Ripple’s 9ema has turned from support into solid resistance.
Ripple’s 9 daily ema was solid support on the way up. Now it is solid resistance on the way down.

Ripple’s trend is solidly down. Trend followers should not buy Ripple right now.
2:48 pm. Dash, IOTA, and Litecoin are all making lower highs and lower lows.
These alt-coins are stuck in downtrends, making lower highs and lower lows. This is a bearish pattern. Trend followers should not buy these alt-coins until they AT LEAST make higher highs and higher lows (i.e. a trend reversal). The safe way to trade is to wait for a new all-time high.



7:19 am. Bitcoin and Bitcoin Cash are making lower highs.
Ethereum’s bounce this morning has pushed Bitcoin & Bitcoin Cash higher. Despite their small bounces, they are still making lower highs. This is a bearish pattern. Trend followers should wait until Bitcoin & Bitcoin Cash make new all-time highs before buying. If Bitcoin and Bitcoin Cash don’t make a new all-time high, then their bubbles are over.


7:12 am. Don’t chase Ethereum’s bounce.
Ethereum has made a rather large bounce this morning, almost reaching the 78.6% retracement.

Trend followers should not chase this bounce. It’s still not clear whether Ethereum’s consolidation is over or not. Trend followers should wait until Ethereum makes a new all-time high before buying.
Read Cryptocurrencies on January 27, 2018.
 

7 comments add yours

  1. What is your long term thought on Bitcoin/cryptocurrency space? According to people like Novogratz, the market is still in its infancy and institutional money is yet to make an entrance, so there is potential left for a large move up. He is talking his book, but I wonder if there is any truth to his view.

    • Medium term: I think there’s a <50% chance that crypto currencies have another big upleg to massive new highs. The current “correction” is different from all the other corrections 2015-present.
      And if there is another upleg, that will be the last one. Long term, I think crypto currencies are dead. Once gold and silver start to surge, all the speculator $ that went into crypto will go into precious metals.

  2. Hi Troy, thanks for shining a light on what you think of NEO (see comments of January 17, 2018). I think NEO will do well next week because of the upcoming NEO DevCon in San Francisco.
    Thank you for your advice.

  3. Thanks for your perspective on crypto. I just started a small position on bitcoin and will be following it closely. I have no idea where the price will go. From a technical perspective, it bounced off the 100 day moving average over the last couple weeks which is why I bought in. The 100day ma has been a reliable floor for a year or so. If it breaks the 100day MA, I will definitely sell at a loss of 5%-15%.
    From your post and the 100day floor, it looks like it’s at a key inflection point.
    Btw, I love your blog and read it regularly!

    • The problem with crypto is that there are no fundamentals. So our outlook can only be based off of fundamentals.

      • just to follow up. i stuck with my plan and sold my small bitcoin “investment” a few days ago once it broke the 100day ma. i would have shorted it as well, but don’t know how to short yet. lol.
        thanks to your technicals (and my thesis on 100day ma), i got out down only ~5% and avoided this crash.
        i also agree that technical analysis may be more reliable than fundamentals. crypto is largely sentiment-driven at this point (and perhaps algo), which is what technicals is all about.

        • Yes, crypto is purely sentiment driven. I read this really good article on Business Insider. 2 academics basically explained that based on fundamentals, Bitcoin should be worth $20. (They calculated how many people actually used Bitcoin for day to day transactions).
          I would never short cryptocurrencies. Too many people get killed shorting bubbles. It happened during the dot-com bubble.

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