Technical Analysis: Weekly Market Strategy
This is the next installment of a weekly, exclusive, series of technical analyses that DeFinity is proud to share with its community.
The analysis is completed by renowned, experienced financial analyst and successful global podcaster, Paul Rodriguez.
Paul Rodriguez lectured at the City University in London on the subject of Technical Analysis whilst working as an award winning analyst at NatWest Global Financial Markets (Now RBS) in the 1990’s, pioneering and promoting the education and use of technical analysis to City professionals and private investors. Paul set up Think Trading to continue that education and consultancy having appeared frequently on financial news channels seeking his views. He set up the State of The Markets Podcast with fund Manager Tim Price three years ago, which consistently tops the top 50 UK business podcasts and has a global audience. He provides bespoke research and consultancy to market-leading firms.
SUMMARY:
Our view that the stalling of the US dollar’s bull trend would follow the Fed’s action is gaining traction. Having spent a week effectively treading water, the appetite to push the DXY higher could be waning. This, coupled with the start of a reversal in US 10-year yields could be building up a more substantial currency move. Given that the USD bull trend has been ongoing for more than a year, the reversal will most likely be a phase rather than an inverted v-shape. This should encourage some risk on trades — if not now, soon.
We expected sentiment in crypto assets to hit a nadir in line with some major support levels. This now could be ‘the’ low which will be confirmed or rejected very shortly. We have included a short-term chart of BTC in order to monitor the reversal points, but the headline is if BTC can hold over 18,600 for a few weeks, the prospects of the start of a major new bull trend will increase. Yes, there is still the fib support level at 14745 that could come into play if this rally fails, but risk-reward favours the upside — even if it’s short-lived.
Copper, the metal with a PhD, has dropped to reflect demand destruction being wreaked by higher energy prices, raised interest rates and the stronger dollar (as mentioned a few times). Whilst we are long-term bulls, an extended retracement could allow for key opportunities once the market recovers from the negative sentiment.
Bitcoin 4 Hour
The 19th June sell-off pushed the market beyond the 18,000 support low, but thin/volatile markets allow for wider parameters. From the low, the market is tracing out a potential bullish Inverse Head and Shoulders reversal — confirmed on a break through 21,600 — for initial targets at 28,547. More importantly, we may have finally seen ‘the’ low, but naturally, we remain cautious until we get broader confirmation. Any close below 18,600 would invalidate the reversal set-up.
Bitcoin Daily
The final stages of a trend is usually characterised by a sharp sell-off. Given that there were previous sharp sell-offs, the distinction is the manner in which the market recovers and the first stage of a sharp bounce has been fulfilled. BTC must quickly build on these lows to reflect short-covering and long-term investors entering the market. A rebound back to 22,957 will increase in probability if support at 19,666 holds this week. If this happens we can discuss extending upside targets.
Bitcoin Weekly
With the correction into the support zone between 18,000 and 19,666, a minor rebound has begun. There remains one final fibonacci support level at 14,475 if this zone does not hold, but all the requirements in terms of excessive bearish sentiment matched with a major support level have been met. This does not guarantee a reversal outcome but does raise the risk/reward ratio if stops are kept tight. A greater weakening in the US dollar would assist (but is not essential) to a reversal.
Oil
We are attenuated our long-term bullish USD view given the muted response from the Fed’s rate move (we expected this). Whilst there is potential for a final extended move to 108 objectives, we are becoming watchful of reversal signals. One positive is short term triangular constriction should resolve into a squeeze higher and is negated on a break of 103.41. This type of pattern would be more aggressively bullish if positioned in a different stage of the trend, but when fundamentals support the move more clearly, its time to be cautious.
Ethereum
Last week’s chart highlighted the next major support between 828 and 900. The market bounced in that zone, but the dent on 11 weeks of negative closes looks small. Despite this, risk/reward is now in favor of a recovery and as long as 828 is not breached, we could be at the start of a major bullish trend. One reversal sign is the spike low, but a recovery over the 200-week m.a. at 1199 would be more encouraging and reinforce the recovery prospects. Naturally, any breach of 828 would suggest major concerns.
US 10 Year Yield
Our final target for 10 year US yields were at 3.60%, but there is strong evidence of demand destruction which should see yields reverse lower from here. Therefore we look for a drop back towards 2.60%, a break of which would confirm a more substantial top. There is scope for an extended move higher, but we are treating this as a reversal zone rather than a trend continuation.
Copper
Whilst we remain long-term bulls of copper, demand destruction has caused a retracement below key support at 3.96. A downward trend should develop towards 3.50/3.36 (long-term m.a.) with the medium-term m.a. at 4.41 acting as a stop loss. We have been expecting a bear phase in the base metals, predominately because of the strong US dollar, but paradoxically the currency may be close to weakening. At some point, currency weakness will come to bear on the base metals trend.
This report is superficial in nature and may contain errors. No warranty is given to the accuracy of the data or text and any reader must understand that it should not in anyway form part of an investment process — that is reserved for that individual/business and an investment professional. No positions should be taken, exited or otherwise considered on the basis of this research. This is a condition of reading this document. The main function is of education into how different chart patterns might indicate a future trend (or lack thereof) and not for the purposes of speculation or investment.
Transcribed to Medium
Original Technical Analysis provided by
Paul Rodriguez — ThinkTrading.com
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