This, my friends, is a fabulous time to be in crypto. I started playing the markets early summer of 2017 and enjoyed the massive bull run that followed. So far 2018 has been absolutely brutal on portfolio balances, but I have a feeling the bear trend is coming to a close. I am seeing a lot of common ground with many of the top alts…price action has flat lined and we are starting to see higher highs and higher lows.
Unfortunately I only have so many hours in the day to dedicate to crypto, as a Dad I have dinner to make, baseball and karate for my son, spend time with the wife, etc. so a good portion of my portfolio is dedicated to mid-term investments so I don’t have to spend a lot of time in front of the computer. Getting a solid entry, setting stops so I’m not holding bags and taking profits are the major things I’ve learned during this recent bear run. Having a trading plan is key, and I would like to review my plan for two major market cap coins for you, the reader of this post.
By the way, this is not meant to be trading advice. I am not a licence broker or financial advisor. It is up to you to develop your own plan of action, and you are responsible for the success and failures of your trading plan! Now, on to my analysis.
XEM and XRP
First, let’s look at New Economy Movement / BTC (XEM/BTC). I’m looking at the Bittrex charts here, this gives me better price history, because NEM was added to Binance early this year. When I’m looking for swing opportunities,I always zoom way out on my chart to see what price action has happened over the last several months. Below is the weekly chart, and it clearly illustrates two massive bull runs XEM holders enjoyed from March to May 2017, and again in December of 2017.
When looking at this chart I can see that the top was consistent on both bull runs, around .00014 BTC. Also, I found it very interesting that each cycle was pretty consistent, around 273 days from run up, to breakdown and consolidation. If this timing is to repeat itself, we are looking to enter a new market cycle and hopefully experience some nice gains.
Let’s now look at the daily chart.
Here’s what I see: It looks like we may have established a bottom @ 1330-1350 ish, as price has started putting in higher lows and higher highs. NEM saw nice volume Oct 1 and 2nd, sending price to 1799. If we set up FIB levels from the swing low (Sept 26 @ 1382 to the high of the wick on Oct 2) we see price consolidating around the .50 level. RSI is creeping up, not quite oversold as of yet, as is the MACD. I like to use Stoch RSI to give insight to cycle trends, and its currently turning down. This may signal further consolidation. Finally to back up the idea that NEM may be looking to move higher, I can see that the 20 period (green) moving average is creeping up to the 50 day (red). It’s also interesting to note that the 50 day MA has settled around the .5 FIB level and is also acting as resistance for now.
How I’m going to play this: I am sitting on some NEM now, and will add more to my position if it drops to the .382 and .236 FIB levels (1540 down to 1485 would be buy zones for me).
Now that I’ve established an entry zone, its vital to set a stop loss and some profit targets. I’m setting my stop below the lows experienced mid September, around 1322. If my entry plan works out, my average buy in should be around 1516ish. I’m looking at the 1.272 FIB extension for my first take profit zone, which would mean a 25.79% profit, risking 12.8% (with a Risk/Reward ratio of 2.02).
OK, now to look at two other important take profit zones. I’m looking at roughly the 2.618 extension (for a 55% profit) and at the 4.236 FIB level (for a 103% profit). Reason for this is that these areas acted as important support levels in the past, and its possible they can act as resistance levels when price runs up.
Finally, I ALWAYS set alarms to my mobile when price action hits these levels. That way, if I get stopped out, I can pull up my trading app and see if it makes sense to buy back lower. Same with take profit zones. If my sell is triggered, I adopt a new trading plan, looking for consolidation to set up a re-entry. Words to live by: No One Ever Lost Money By Taking Profits!!
Ok now lets take a look at Ripple (XRP). Currently sitting at number 3 in terms of market cap, Ripple had some nice bull action in the last couple weeks and for a short period overtook Ethereum (ETH) as the number 2 cryptocurrency on the market. I’m not going to go far into fundamentals here, I’m simply going to look at the price action and see if I can come up with a plan to make a nice return.
Here’s the weekly XRP/BTC chart on Binance:
As we can see, XRP had a monster run to close out 2017 and for the majority of the year it’s been mostly in the bears control. In the recent weeks however, XRP saw a really nice run up and this week it looks to be consolidating from hitting its recent high. I set up a FIB of its swing low (first week of December ‘17) to its swing high (first week of Jan ‘18) to get an idea of retracement levels for this massive move. I also set up a sloping trend line here to help illustrate its general trend for the year.
Now, onto the daily chart.
I kept my long term FIB intact (represented by the dotted lines and the grey numbers on the right of the chart) and also set up a second FIB to measure the latest breakout (in aqua blue).
What interests me most with XRP right now is its recent bull run, and how price is responding. After 5 days of consolidation from the big move on the 20th and 21st, price is putting in lower highs and consistent lows. Looks to me like a range that is getting very tight, which may result in price moving either way with some gusto very soon. I’m seeing some bullish signs in regards to the moving averages, considering the 100 (red) recently crossed over the 200 (orange). RSI is cooling off from being overbought, and StochRSI is looking to reset.
I do not currently have a position in XRP, but have made some awesome gains from it in the past, so I’m waiting to see what comes out of this range.
Lets now have a look at the 4 hour chart to see if we can get more clues to where price may be headed.
When having a peek at more detail of what price is doing inside that wedge, the first thing I noticed was a head and shoulders type pattern that just formed. This traditionally is a bearish formation, and it is common to see price drop once it has completed. I also note that the 20 period MA (green) has begun to cross under the 50 MA (red). Price itself is hovering right around the .5 retracement level from the earlier breakout.
How I’m going to play this: Right now I think its too risky to enter into a long position at current prices. If I was daytrading this on Bitmex I would be considering a short (we will save detailed analysis on leveraged long and short positions for another day) once support broke (around 7770ish). I’m considering XRP as a no trade zone today.
If XRP breaks down bearish, I am interested in the .236 FIB level, as the long term FIB (grey with dots) and FIB of this move are in a similar zone. Setting an alarm around 6200 level will give me a heads up that price has broke down, and I will analyse the situation as it presents itself.
On the bullish side of things, if XRP breaks out of the wedge with higher prices I will be watching to see how price reacts to the .618 level (which also lines up nicely with my long-term FIB at the .382 ). Resistance is just above those price levels, and if I see volume coming back I may consider buying the breakout if the play looks good.
In my opinion, no trade is the best trade you can take in times of uncertainty.