Crypto break-outs pending? Tight consolidations look bullish

Seeing is believing for many TA’s but traders and investors don’t always have that luxury – Many technical analysts understandably prefer to see technical patterns resolve in one direction or another before committing new capital to a developing trend. We  have said it before, pre-judging technical patterns before they resolve can be detrimental to one’s  financial health. That’s all fine for starting new positions but most investors are already committed to positions that need to be managed. The alternative approach is to be positioned with an expectation a pattern will resolve in a specific direction and managing the uncertainty with stop losses should the pattern resolve in the opposite direction. Given the volatility within digital assets, that approach may very well prove to be a better tactic in the coming weeks. 

Why is this discussion likely important now for digital assets now? Over the past few weeks, most digital assets have traded in increasingly narrow ranges head faking every few days in one direction or the other. Our expectation is many cryptocurrencies will resolve to the upside in the coming weeks given their underlying trend since the March lows remains positive and in the case of BTC, its longer-term trend remains positive. In short, we want to be positioned in the direction of the longer-term trend and expect another upside move to develop shortly. 

Noteworthy technical improvement developing within the Fundstrat FS CryptoFX A-D lines and indices. Supporting our positive outlook is the ongoing improvement in our A-D lines trending higher along with the H2 2019-2020 downtrend reversals that are now in place for the FS CryptoFX 10 large-cap, FX40 mid-cap and FX 250 small-cap index. In addition, relative performance of the FS Crypto40 mid-cap continues to improve versus the FX10 large-cap index.

BTC – Very little has changed this week with BTC consolidating above 9-9.5K support just below the widely watched 10K and 10.5K resistance levels. BTC continues to edge higher along its 2-month uptrend and we expect it breaks above 10K in the coming 1-2 weeks, possibly sooner, to challenge next resistance near 10.5K. We continue to view the longer-term trend as bullish with the 2017-2020 downtrend near 10.5K defining a resistance level in the cross hairs for anyone watching BTC’s chart. It is the first level that will need to be exceeded to signal the early stages of a new uptrend followed by 13.8K.  On the downside, 9.1-9.5K just above the rising 50-dmam remains short-term support and a stop loss/reversal level.

ETH has made very little absolute price headway over the past week after rallying almost exactly to its March 7th highs at 252. Short-term momentum (RSI) is overbought but ETH has yet to show any evidence of failing as it consolidates in a tight range below 252 resistance. A push above 252 would support a move toward the Q2 2020 highs at 289.

ADA – Over the past few weeks, we have featured ADA as one of a handful of Alts exhibiting impressive technical strength, breaking above resistance levels ahead of most other cryptocurrencies. After an impressive surge, ADA is beginning to pause but has yet to show evidence of reversing its relative uptrend vs BTC.

XMR is illustrated as a proxy for the tight consolidations developing in the ALT space. Our expectation is XMR is poised to break-out of its May-June trading range which should ripple through to many other Alts. 

Could we be wrong? Of course, but the benefit of technical analysis is that we will know our trading view is incorrect very quickly on a break below the consolidation lows of the past two weeks.