Price Analysis, October 28: Bitcoin, Ethereum, Bitcoin Cash, Ripple, Litecoin
The number of hedge funds which exclusively trade digital currencies has grown to 120, with about $2.3 bln in total assets under management, according to the financial research firm Autonomous Next.
While it sounds like a large number, it pales in comparison to the $3.15 tln managed by the hedge fund industry in the third quarter.
Cryptocurrencies have attracted only a small number of institutional investors because most still remain skeptical. The latest criticism comes from legendary investor Warren Buffet, who has said that Bitcoin is in bubble territory.
Well, a correction after such a stupendous rally is certainly possible. Therefore, we always recommend a stop loss to our readers. Even if the digital currencies correct sharply, our losses will be limited and our capital will be preserved. We can again reinvest at lower levels.
We had recommended long positions in Bitcoin in our previous analysis, with our target objective being $6000. On Oct. 27, the digital currency hit a high of $5986, where hopefully traders would have booked partial profits as suggested. Where is Bitcoin headed next?
Bitcoin is currently correcting towards the trendline support at $5600. Just below this support is the 20-day exponential moving average (EMA) at $5513. We expect buying to emerge at these levels, however, we are not certain that this level will hold this time.
Our stops at $5650 have been hit. We would like to sit back and wait, because if the support zone of $5513 to $5600 breaks, the digital currency will slide to $4975 levels.
On the other hand, if the support zone holds then Bitcoin is likely to remain range-bound between $5600 to $6000. However, the next buy on the virtual currency will only be triggered if it breaks out to new highs and crosses the resistance line of the ascending channel.
Presently, we don’t find any buy setups, therefore, we don’t not recommend any fresh trade on Bitcoin.
We don’t have any existing positions or recommendations on Ethereum. The bulls and the bears are taking a break after the hugely volatile day on Oct. 22.
Ethereum has a slew of resistances from $300 to $315 levels. Therefore we recommend a long position only on a breakout, and close above $315 with a close stop loss. The first target is $353.
On the downside, it has support from the trendline at $280, below which it is likely to fall to $272 and thereafter to $252 levels.
At current levels we don’t find any buy setups on Ethereum, hence we do not suggest to trade on it.
We had observed some buying in Bitcoin Cash but we did not recommend any trade because the risk to reward ratio was not favorable. Do we see a trade on it now?
The cryptocurrency is currently returning from the upper end of the range at $400. The 50-day simple moving average is also at $398. Therefore, we expect a stiff resistance at $400 levels.
However, if the digital currency breaks out of this overhead resistance, it has a pattern target of $518.
Hence, we can buy on a breakout and close above $400. We shall limit our risk by keeping a stop loss of $350. We don’t want to hang on to the trade if it falls back into the range.
However, if Bitcoin Cash fails to breakout and close above $400, it is likely to remain range bound for a few more days.
Both the buyers and the sellers seem to have deserted the digital currency in the past three days, as a result of which, the volatility has shrunk. However, this period of low volatility is unlikely to sustain for a long time. We should soon see an expansion in volatility.
If Ripple breaks out of the moving averages, it should attempt a pullback to at least $0.23955 levels, which is the 50 percent Fibonacci retracement of the fall from $0.29699 to $0.18211. If the virtual currency breaks out of this level, then a rally to $0.25311 and $0.27241 is also possible.
Therefore, we recommend a long position at $0.22 with a stop loss of $0.19650. As this is a risky trade, we suggest using only about 30 percent of the usual allocation.
However, if the cryptocurrency fails to breakout on the upside, it can drift down to $1.8211 levels.
Litecoin has not been able to breakout of the range of $44 to $57.7. Therefore, our buy levels were not triggered.
The 50-day SMA is situated at $55.59, while the 20-day EMA is at $56.57. Just above the moving averages is the upper end of the range at $57.729. If the digital currency breaks out of all these resistances, chances are that it will start a new uptrend.
Therefore, we retain our buy recommendation provided in our previous analysis. Please buy on a breakout and close above $57.7. The stop loss is $51, whereas the target objective is $71.
If Litecoin fails to breakout of the overhead resistance, it will fall back towards the $52 levels.