Position Updates — Welcome the dip, like we did!

We’re getting a pretty good dip here to start the week on most names within the crypto space, so I’ll run through same of them on this update. The crypto markets like to make these big moves either on the weekend or holidays, but you want to welcome the dip as an important trading opportunity. We did a really good job taking profit on all that strength last week — we always want to be a seller into strength, that’s a pretty general rule: If you’re long or you’re bullish, you want to buy the weakness and obviously be a seller into the strength.


BITCOIN

Starting with Bitcoin, last week we said you’ve got to be a seller into $5,000, which is a big whole number and an important psychological level. We identified a cup and handle pattern completing near the old highs, then we added to our position on the breakout, and we said that we expected to take profits as price got up towards $5,000. Sure enough, there were sellers right in front of $5,000. The reason you don’t wait for the whole number is because a lot of times you’ll miss if the price doesn’t quite make it there. Everybody has the whole number in mind and people will sell in front of it because nobody wants to miss. The more professional traders will jump in front and sell around the $4,900-handle or even $4,975, not waiting for $5,000. So I’m not surprised that we failed there, that just comes with experience.

Now you’re getting another nice pullback and the 4 hour cycle is low. I bought back what I sold into the highs. Typically in our model when price fails to hold the green Wave Formation Bands, it tends to pull back to the 200 moving average and/or the Pi Line, so the $3,600 area is a big support level. I’m expecting price to pull back towards the 200 ma, around $4,000. I know the 4 hour cycle is low which is why I nibbled in case we do pop back up. You can buy a tiny piece here but you just have to keep in mind that it might be a little early and we could still have another leg down. You can see that better on the Daily chart.

The Daily cycle is high so there is a lot of room for it to come lower. If that’s the case, it’s possible that we might see a pretty deep pullback to the lower end of the green bands, around the $3,600 level. The uptrend would still be in place, but that’s an area to keep an eye on for a much deeper pullback.

So either price holds here or we could be in for a down week and see the Daily cycle come all the way back down. If price does get down towards $3,600, we would be pretty aggressive and buyers for sure. The risk would be if the market does not hold there — you might have to play defense, stop out on some and try to wait for a deeper pullback, etc., but I don’t want to talk too much about that just yet.


ETHEREUM

Looking first at Ethereum versus Bitcoin, we mentioned last week that anytime price got towards the bottom of the channel, you wanted to think being long Ethereum, and when the price got towards the top of the range you should lighten up on ETC. On the Daily chart below you can see that price was near the top of the channel last week and now it’s back down towards the lows again. I bought some back here and I’m going to buy more into these lows versus Bitcoin.

When we look at Ethereum versus the Dollar, we talked about this the whole way up that you want to be a seller into these old highs right in front of $400. From here, we’ll see if price can hold the bands around the $275 level. If it doesn’t then it could possibly fall back towards the area around $200 and the 200 MA just below $200. This is where we were buying last time and would look to buy again. Remember, you don’t want to be chasing these highs but instead you want to be buying here on the lows and then look to come out of some into the old highs. So I did buy a piece back of what we sold. When we take profit well, it makes it easy to buy back on all the all the red we’re seeing now.


LITECOIN

Similar to Ethereum, we took some profit into the high on Litecoin, and now I’ve bought some back here. We’ve retraced about halfway of the recent up-move so price might make a higher low in this area, or it could possibly retrace to the 61.8% or 80% area right in front of $50. If price does get back down towards $50, I will buy heavier down there since we are still in a long term bull market.

Here is an updated breakdown of value in each currency based on USD. We are still diversifying more every day.


BASIC ATTENTION TOKEN (BAT)

We saw a a decent bounce off the low of the range to begin the week and it was a good spot to buy when the 4 hour cycle was low and the RSI was oversold– unfortunately I missed it. But if we get another push lower on BAT I definitely want to get more aggressive at lower prices. Looking at the Daily chart, the cycle still has some room to come down — something I’m seeing on most of these charts at the moment. We could possibly have a down week in crypto overall, so I want to pick our spots and be a little patient here. We did have some nice rounds of profit-taking on BAT last week so when you take well, it’s much easier to buy back again.


NEO

NEO is one of the names we really like (the other being OMG) and the recent price is obviously reflecting the Chinese news. Prior to that of course, we saw a nice accumulation period followed by a huge move up around the time of the rebrand. We were taking profit all the way up into the highs. Now we’re seeing the reverse with price. It rallied pretty steep and there is a lot of angle and distance, so I’m not surprised to see this kind of retracement. In fact, if you roughly measure the lows to the highs, you can see that price has since retraced about 80% of that move. With the volatility often seen in the crypto space, it’s not uncommon to see these kinds of pullbacks and that’s what we had Monday, however, I was a buyer here.

The Daily cycle for NEO is already quite low, as it has been going through a pullback for about the last 2 weeks, whereas Bitcoin and some of the other names really only topped out last Friday and their Daily cycles are still much higher by comparison. With NEO, I think we’re back to levels where we want to start thinking about getting more aggressive. In my previous update today I mentioned how I want to be patient on Bitcoin and some of the other majors, but NEO is the first name I thought of when I saw the sea of red as the crypto markets began this week because I have been waiting for this pullback.

We had a good opportunity to buy because the 4 hour cycle was very low as well as the Daily, and the RSI was deeply oversold (down around 18–19). This is setting up for some long-term plays in our core position so I like being a buyer down here.


OMG

Price tagged up at the 200 moving average on the 4 hour chart and bounced nicely. At the same time, the RSI was quite low and the cycle was turning back up. I bought into the lows here at the same time I was buying NEO. On the 4 hour chart below, you can see we took some profits into the recent highs and now we’re buying some back again. The cycle is still high on the Daily chart, so I would rather see a deeper pullback so that I can get even more size on — this is one of my lighter positions at the moment and I like this name a lot.


MONERO

Monero is an example of the 50% wall concept we use in our trading model and something my traders are very familiar with. The green rectangle encapsulates the entire move up and forms a bullish “wall”. Price has now retraced about 50% of that move. Price is in the vicinity where I would expect to see the market hold here and rally and/or hold a little bit deeper near the bottom of the Wave Formation Bands and bounce from there. I’ve nibbled a bit here at these levels but price is getting back the levels were I’ll step up my size even more if we get one more push down and the Daily cycle gets lower — that’s where we want to be aggressive on Monero.


DASH

I need to add back to Dash after we had a couple good rounds of profit-taking in August. Very similar to Monero, we had a nice rally up to form our bullish “wall” and now price has just about retraced 50% of that move. Again, we would expect the market to hold around this area and rally from here or from the bands a bit lower.

We’ll be watching to see how these markets react from here. I didn’t want to add too much on a day like this; you want to give yourself room to add more at potentially lower prices, not just get all excited in one day — especially given how the Labor Day holiday could see some move get a little exacerbated — so we’ll see.

Here is an updated breakdown of value in each currency based on USD. We are still diversifying more every day.


A little about me now…

Before joining CG Capital, I spent almost a decade trading US Treasuries and building out a successful institutional analysis and fixed income trading business. I have covered all the primary dealers, large buy-side money managers and hedge funds. My financial career began at Charles Schwab as a trader in the equity and options markets before moving to the sell-side to trade fixed income at vFinance, JVB Financial, and CG Capital.

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