Traders prefer to trade a trending market as it generally moves in one direction and the retracements offer low-risk entry opportunities. This is because a trade that follows the major trend carries a greater possibility of earning profits than one in a volatile market.
As several cryptocurrencies started a trending move in July, web traffic to the crypto exchanges also increased by 13%, according to data from ICO Analytics.
Daily cryptocurrency market performance. Source: Coin360
The derivatives market also comes alive when the underlying market is trending as professional traders use leverage to make quick profits using the futures and options route. This could be one of the reasons for the sustained increase in Ethereum (ETH) options open interest over the past three months.
Several reasons can be attributed to the start of a trending move in an asset class. Max Keiser believes that capital fleeing Asia is one of the main reasons for the sharp rally in Bitcoin (BTC).
Let’s analyze the charts of the major cryptocurrencies to find out whether the uptrend is likely to resume or is it time for a correction to start.
The bulls are attempting to push Bitcoin above the overhead resistance of $12,113.50, which is a positive sign. This suggests that the bulls are not booking profits yet, which is frustrating the traders who have been left out because they are forced to buy at higher levels.
BTC/USD daily chart. Source: TradingView
Both moving averages are sloping up and the relative strength index is in the overbought zone, which suggests that bulls are in command.
A breakout and close (UTC time) above $12,113.50 is likely to resume the uptrend. There is a minor resistance at $12,304.37 but that is likely to be crossed. Above this level, the uptrend can reach $13,000 and above it $14,000.
Contrary to this assumption, if the bears aggressively defend the $12,113.50 level, the BTC/USD pair might correct to the 20-day exponential moving average ($11,052). A strong bounce off this level will increase the possibility of a break above the overhead resistance.
However, if the bears sink the price below the 20-day EMA, it will signal weakness. Below this level a retest of the $10,400 level is possible. A drop below this support will signal that the bears are back in the game.
Ether (ETH) has been trading above the breakout level of $366 for the past few days, which is a huge positive as it shows that the bulls are not hurrying to liquidate their positions. This suggests that the bulls expect the uptrend to continue.
ETH/USD daily chart. Source: TradingView
Both moving averages are sloping up and the RSI is in the overbought zone, which indicates that the path of least resistance is to the upside. A breakout and close (UTC time) above $415.634 will signal a resumption of the uptrend towards the next target of $480.
However, if the bears defend the $415.634 resistance, the ETH/USD pair might spend some more time inside the range.
This bullish view will be invalidated if the bears sink the price below $366. Such a move will suggest a weakening momentum that can drag the price to the 20-day EMA ($351). A break below this support could signal a deeper correction to the 61.8% Fibonacci retracement level of $304.367.
XRP is currently trading inside a falling wedge pattern, which usually acts as a bullish setup. If the bulls can push the price above the wedge, the uptrend is likely to resume with the first target at $0.346727 and then $0.432105.
XRP/USD daily chart. Source: TradingView
The correction from $$0.326113 has been healthy as it has pulled down the RSI from deeply overbought levels. Both moving averages are sloping up, which suggests that the bulls have the upper hand.
This bullish view will be invalidated if the bears sink the price below the wedge and the 20-day EMA ($0.267). Such a move will be a negative sign that can drag the XRP/USD pair to the 61.8% Fibonacci retracement level of $0.244472.
Bitcoin Cash (BCH) dipped to the 20-day EMA ($284) on Aug. 7 and again on Aug. 10, which suggests that the bears are attempting to sink the price back below the breakout level of $280.
BCH/USD daily chart. Source: TradingView
If they succeed, it will be a huge negative as it will indicate a lack of demand at higher levels. Such a move could result in a fall to $260 and then to $245.
However, the 20-day EMA is gradually sloping up and the RSI has been sustaining above the 60 level, which suggests a slight advantage to the bulls.
If the bulls can push the price above the downtrend line, it will signal advantage to the bulls. Above this resistance, a rally to $353 is possible. A breakout of this level could resume the uptrend to $400.
Chainlink (LINK) dipped on Aug. 7 to $9.05 but the bears could not sustain the lower levels. By close (UTC time), the price had recovered sharply from the intraday lows, which shows aggressive buying by the bulls.
LINK/USD daily chart. Source: TradingView
This move seems to have caught the aggressive bears on the wrong side, and they were forced to cover their short positions as the price broke out to new highs, which resulted in a strong rally on Aug. 8 and 9.
The LINK/USD pair rose to a high of $14.4586 on Aug. 9, which is just below the 200% Fibonacci extension level of $14.8537. The bears are likely to mount a stiff resistance in the $14.4586–$14.8537 zone and the RSI has also risen into the deep overbought zone, which suggests a minor consolidation or correction.
Contrary to this assumption, if the bulls continue to buy at higher levels and push the price above the resistance zone, a rally to 261.8% Fibonacci extension level of $17.4319 is possible.
The bulls are struggling to push Bitcoin SV (BSV) above the $240 resistance, which suggests a lack of demand at higher levels. However, on the downside, the bulls are buying the dips to $214.
BSV/USD daily chart. Source: TradingView
The 20-day EMA ($216) is flattening out and the RSI is gradually falling, which suggests that the bulls are losing their grip. If the bears sink the price below the 20-day EMA and the $214 support zone, a drop to $200 is possible.
On the other hand, if the BSV/USD pair rebounds off the 20-day EMA, the bulls will once again attempt to push the price above $240. If successful, a move to $260.86 is likely.
Litecoin (LTC) has roughly been trading between the $56–$60 level since Aug. 2. This suggests a balance between demand and supply. However, as both moving averages are rising and the RSI is in the positive zone, the advantage is with the bulls.
LTC/USD daily chart. Source: TradingView
If the LTC/USD pair rises above $60, the advantage will shift in favor of the bulls. Above this level, a rally to $65.1573 is possible. This is the critical level to watch out for because, if the bulls can propel the price above this level, the momentum is likely to pick up.
Conversely, if the bears sink the pair below $56 and the 20-day EMA ($54.83), a drop to the critical support at $51 is possible. A break below this support will signal a possible change in trend but if the bulls buy the dip to this support, the pair might remain range-bound for a few more days.
Cardano (ADA) turned down from the $0.15–$0.1543051 resistance zone on Aug. 9, which shows that the bears are aggressively defending this zone. However, the upsloping moving averages suggest that the path of least resistance is to the upside.
ADA/USD daily chart. Source: TradingView
If the ADA/USD pair rebounds off the 20-day EMA ($0.1379), the bulls will make one more attempt to scale the price above the zone. If they succeed, a rally to $0.173 and then to $0.20 is possible.
However, if the bears sink the price below the 20-day EMA, a drop to the $0.13 support is likely. A bounce off this support could keep the pair range-bound for a few more days. A break below $0.13 is likely to shift the advantage in favor of the bears with the next support at $0.12.
Binance Coin (BNB) has been trading inside the tight range of $21.7628-$22.93 for the past three days, which shows uncertainty among the bulls and the bears about the next directional move.
BNB/USD daily chart. Source: TradingView
While the bulls are buying the dips to $21.7628, the bears are defending the overhead resistance at $22.93.
However, the moving averages are sloping up and the RSI remains in the positive zone, suggesting advantage to the bulls. If the bulls can push the price above $22.93, a move to $24.4588 and then to $27.1905 is possible.
Contrary to this assumption, if the bears sink the price below $21.7628, a drop to the 20-day EMA ($21) is likely. A break below this support will signal a possible change in trend.
Crypto.com Coin (CRO) remains in an uptrend but it is facing resistance near the highs at $0.176596. Hence, it is likely to consolidate between $0.176596 and $0.154322 for a few days.
CRO/USD daily chart. Source: TradingView
The RSI is showing signs of forming a bearish divergence, which indicates that the momentum is weakening. If the bears sink the price below the 20-day EMA ($0.159), it will indicate profit booking and a break below $0.154322 will shift the advantage in favor of the bears.
This assumption of a correction will be invalidated if the CRO/USD pair continues higher and breaks above $0.176596. Above this level, the next level to watch out for is $0.20.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
Market data is provided by HitBTC exchange.