Cryptocurrency Market Analysis for January-February 2019

Tech Analysis

Summary

  • February sees record gains for cryptocurrencies
  • BTC gains 12 per cent by end of February
  • ETH gains over 30 per cent by month-end
  • LTC gains over 50 per cent across the month

    Bitcoin (BTC/USD)

BTC started February trading against the US dollar at $3,341 (label A). By close of the month, the cryptocurrency achieved $3,750. This represented a gain of 12 per cent over the previous 30 days of trading.At the beginning of February, BTC was trading sideways, seemingly finding resistance at $3,400 and support at $3,300 (see chart). The relative strength index (RSI) was between levels 40 and 60 during this period. On 8 February (label B), the 7-day moving average (7-Day MA) crossed over the 21-day moving average (21-Day MA). This set the ideal stage for a bull run later in the month. Additionally, the RSI went past the 70 level on 8 February, marking the sign of a bullish breakout. Consequently, the resistance level of $3,400 was broken and BTC achieved a new high of $3,669. This was then followed by a consolidating phase that saw the cryptocurrency find support at $3,470 and resistance at $3,560 mid-month. This period of sideways trading continued until 18 February, when there was a second bullish breakout and BTC achieved a new high of $4,070 on 24 February (label C). This was, however, followed by a bearish move, which engulfed gains as bears pulled the price back to below the $4,000 mark at month-end.

Currently, the bullish rally seems to have lost its strength. The RSI is dangling between 40 and 60. An intra-range trading strategy would be ideal in such a situation. Support levels can be placed at the $3,700 to $3,720 range and resistance levels at $3,780 to $3,800 (see chart). Traders can take a long position once the price bounces back from support levels, or alternatively go short once the price pulls back from resistance levels.

Ethereum (ETH/USD)

ETH started February trading at $103 (label A) against the US dollar. The cryptocurrency then traded sideways for five days before it dipped below $100 on 6 February. The bulls managed to quickly push the price back up, and it subsequently broke resistance levels at $105 to achieve a new high of $121. New support levels were placed at $115 and resistance levels were defined at $120 mid-month. A bullish rally on 17 February (label B) further pushed the price up to a new high of $142. During this period, the 7-day MA crossed over the 21-day MA and seemed to be providing support for the upward trend. The RSI was above 70, seemingly signalling that ETH was at overbought levels. The currency then went into consolidation for a few more days before achieving a new high of $160.This was then followed by a bearish engulfing that pulled the price below $150.

An intra-range strategy would be ideal in the short term with support at $130 and resistance at $135.Traders can go short once the price pulls back from resistance levels at $135 or take a long position if the price bounces back from support levels at $130.

Litecoin (LTC/USD)

LTC began February at a price of $30.88 (label A). The cryptocurrency seemed to find resistance at $34 and support at $30. On 8 February (label B), LTC managed to break resistance levels at $34 to achieve a new high of $45. During this period, the 7-day MA crossed over the 21-day MA and acted as support for the bullish rally. The currency then went into consolidation for a few more days as it found support levels at $39.The bulls came calling again on the 17 February, and in the next few days saw them push the price to a new high of $50. A bearish engulfing followed this that saw the price pulled back to $44.

In the short term, LTC seems to be sideway bound with support at $43. Looking at the RSI, it is aiming for the 70 level. This may indicate that a bullish rally is in the offing. We urge caution and suggest a range bound strategy at this level. Resistance levels can be placed at $45-$48 and support at $43.Traders can go short if the price pulls back from resistance levels or take a long position if it bounces back from support.

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