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The rebound in the cryptocurrencies has hit a wall following a slew of negative headlines.
Today, we should get some insight into the Fed’s plans to shrink its massive balance sheet. This news will affect the US dollar and can also influence the cryptocurrencies. These are uncertain times; therefore, we suggest traders cut their position size in half to limit their risk.
Between $4,000 and $4,100, there is a confluence of resistance from both the moving averages and the downtrend line. The 50 percent Fibonacci retracement of the fall from $4,975 to $2,974 is also just below the $4,000 levels. Therefore, we had avoided recommending any trade in our previous analysis.
However, after consolidating for three days, if Bitcoin breaks out of this resistance zone, we expect it to gain momentum on the upside. Though there is a minor resistance at $4,210 - the 61.8 percent Fibonacci retracement level - we expect this resistance to be crossed. The next major resistance is at $4,680, after which a retest of the highs is likely.
Therefore, we recommend buying Bitcoin on a breakout above $4,120. However, before initiating long positions, the traders should watch for an hour or two to confirm that the breakout is sustaining.
The stop loss can be maintained at $3,660 initially. Once the cryptocurrency breaks out of $4,210, the stops can be raised to $3,800. Traders should similarly trail their stops higher to reduce their risk. Partial profits can be booked at $4,600 levels. Remaining positions can be sold closer to $5,000 levels.
On the other hand, if Bitcoin fails to breakout of the overhead resistance, it will retrace the recent bounce from the lows and is likely to fall to $3,500 levels.
Ethereum also performed according to our expectations. It is facing stiff resistance from both the moving averages and the 50 percent Fibonacci retracement levels of the fall from $409.42 to $200.15.
A breakout of the resistance zone of $275 to $310 will indicate strength. Therefore, traders can buy above $312 and keep a stop loss of $250. There is a minor resistance zone between $329 (61.8 percent Fibonacci retracement level) and $344. If the digital currency struggles to breakout of these levels, traders should raise their stops to breakeven. However, if these levels are crossed, a move to $409 is likely.
On the other hand, if the digital currency is unable to breakout of the overhead resistance, it can fall to $240 levels, which is a significant support.
Bitcoin Cash has been hovering around the $500 mark for the past two days.
It has been facing resistance from the downtrend line. However, a breakout and close above the downtrend line can propel the digital currency towards the $700 levels.
Therefore, the traders can initiate long positions at $550 and keep a stop loss at $400.
If, however, the cryptocurrency returns from the downtrend line, it can fall to $400 levels.
Ripple has not been able to breakout of the critical overhead resistance of $0.19300.
The digital currency remains bearish until it breaks out of the downtrend line of the descending triangle. It has support at $0.15000 and $0.13500 levels.
Notwithstanding, if the cryptocurrency breaks out of the downtrend line, it will indicate a change in trend. Failure of a bearish pattern is a bullish sign. However, we don’t find any buy setups. Therefore, we are not recommending any trade on Ripple.
Litecoin is facing resistance at the 38.2 percent Fibonacci retracement levels of the fall from $93.649 to $32.681.
The cryptocurrency will change its trend only on a breakout above the downtrend line and the overhead resistance at $60. Until the digital currency trades below these levels, it remains weak.
We don’t find any reliable buy setups on Litecoin thus we remain neutral on it.