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The market data is provided by the HitBTC exchange.
There are various reasons behind the panic currently gripping the crypto world – increased regulations, hacking, and crackdown by various governments. Additionally, the last leg of the rally looked frothy as traders gobbled up cryptocurrencies at crazy levels out of fear of missing out on the rally.
But when the mainstream media highlights negative news, investor sentiment is affected and some traders panic and dump their positions out of fear of losing their capital.
Some analysts believe that the bubble in cryptocurrencies has burst, while the others believe that the current fall is a great long-term buying opportunity.
We consider the recent fall as a great buying opportunity. However, all cryptocurrencies will not rise equally from their current levels, as markets will start distinguishing between different cryptocurrencies.
Therefore, we should look to buy stronger currencies that have fallen less and are bouncing off sharply from their key support levels.
Let’s explore which cryptocurrencies are showing signs of a pullback.
BTC/USD
Bitcoin is in a firm bear grip. It has declined about 55 percent from its high. With the recent fall, the cryptocurrency has retraced close to 78.6 percent of the latest leg of the rally. We find first signs of buying at $8000 levels.
In 2017, the RSI fell to the oversold levels (about 30) on three occasions and all of them proved to be a good buying opportunity. Presently, the RSI is close to the oversold levels. Therefore, there is a greater likelihood of a bottom formation around the current levels.
Aggressive traders can buy between $8,600 to $8,600 and keep a stop loss of $7,800. The pullback can lift the BTC/USD pair to the overhead resistance of about $10,700.
We anticipate another round of selling in the resistance zone of $10,700 to $11,300 (at the 20-day EMA). Therefore, traders should book partial profits at $10,500 levels and trail the rest. This is a risky trade and should be attempted with less than 50 percent of the usual position size.
The next leg down will confirm a bottom in the cryptocurrency, if it doesn’t break the recent lows of $8,000. If the lows break, the downtrend can extend to $6,000 levels. Therefore, we recommend that long-term traders should wait for a couple of days before buying.
ETH/USD
Our stop loss on the long positions in Ethereum was hit at $1,000. It could not escape the panic that has gripped the cryptocurrency market.
Today, the ETH/USD pair broke below the uptrend line, the 20-day EMA and the 50-day SMA. It finally took support at $768, just below the panic low of $770 hit on January 17 2018.
The pullback from the lows is likely to face resistance at $1,025 levels. At the current levels, the risk to reward ratio is not attractive. Therefore, we are not recommending making any trades on this currency.
However, if the next fall towards the $820 to $770 level holds, we suggest long positions with a SL at $700.
BCH/USD
Bitcoin Cash has completely retraced the last leg of the rally. It has slumped about 73 percent from its peak.
In our previous analysis, we forecasted that if the $1,364.9657 level breaks, a fall to $1,150 is likely and that is what happened. The cryptocurrency fell to a low of $1,000 where buying emerged.
The pullback can carry the BCH/USD pair to the downtrend line, where we anticipate another round of selling.
Bitcoin Cash has been a laggard; hence, we want to see a further confirmation of a bottom formation before recommending any trade. We are most likely to recommend a long position if the support zone of $1,150 to $1,000 holds during the next fall.
XRP/USD
Ripple has taken the current fall on the chin. At the day’s intraday low of $0.61, it had declined 81.5 percent from lifetime highs of $3.317.
The momentum was so strong that the critical support level of $0.87, which had acted as a strong support on January 16 and January 17 also failed.
The XRP/USD pair fell close to the next support level of $0.61, which is the final support, below which, a fall to $0.24 is likely.
The current pullback should reach the downtrend line which should offer a strong resistance. The risk to reward ratio is not attractive, so we don’t suggest any trade on it.
XLM/USD
Stellar has broken below the 50-day EMA. At the days intraday it also broke below $0.41 and fell towards the final support of $0.296.
Strong buying at the lower levels helped the cryptocurrency pull back above the critical support of $0.41. If the level holds, we may see a range bound action on the XLM/USD pair for the next few days.
Steller will likely become a buy once it breaks out of the upper end of the range at $0.64.
We are not recommending a buy today because a pullback of a single day cannot confirm a bottom.
LTC/USD
After breaking the critical support of $175, the bulls failed to hold the $140.001 levels and Litecoin fell to a low of $107.102.
Strong buying at the lows is likely to carry the LTC/USD pair towards the overhead resistance of $175.
However, the cryptocurrency has been weak and its logical support is way lower at $84.708. Therefore, we don’t recommend any long positions on it.
XEM/USD
NEM has declined about 74 percent from the highs. It has found some buying support at $0.45747, just below the critical level of $0.49.
The pullback should reach the downtrend line, which should offer strong resistance. The risk to reward ratio is not attractive and the XEM/USD pair has been an underperformer. Therefore, we want to wait for a further confirmation of a bottom before cherry picking.
During the next retest of the low, if the $0.45 level breaks, a slide down to the next support of $0.3672 is likely.
NEO/USD
NEO broke below the symmetrical triangle on February 1 2018. Today (February 2), it fell close to the critical support level of $93.53 which resulted in strong buying by the bulls.
The pullback in the NEO/USD pair has reached close to the breakdown point of $132, which should offer a strong resistance level.
NEO is one of the stronger cryptocurrencies in the top 10 list because it is still quoting above the 50-day SMA.
We consider that it might be better to buy NEO during the next fall to $105 levels.
EOS/USD
We were expecting the trendline to provide some support, but the bears easily broke down below it. EOS found buying support at the $8.4 levels, close to the critical support zone of $7.5 to $6.5.
The EOS/USD pair is comparatively strong because it is also quoting above its 50-day SMA. Aggressive traders can buy on any dips towards $9 and keep a SL of $7.4.
The profit objective on the upside is a rally to $14 levels.
We recommend that the long-term traders, however, should wait for a buy set up to form before initiating any long positions.
Note: - Bottoms are not formed in a single day. After such a steep decline, we are likely to see a pullback and a few days of volatile price action. Therefore, we have suggested only a few trades and that too only for the aggressive trader.
The long-term traders should wait for a successful retest of the lows before buying.
The market data is provided by the HitBTC exchange; the charts for the analysis are provided by TradingView.