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OKEx Technical Weekly: The last dance…for now? (Apr 27, 2020)

Key takeaways

  • The positive sentiment that build around BTC halving could push BTC prices marginally higher. However, data suggests that the party may soon over.
  • ETH sets to test multiyear resistances at the time that more Ethereum 2.0 conversations have been taking place in the markets.
  • Bears hold a firm grip in LINK as rally looks tired.

Market overview

Sentiment in the cryptocurrency markets was generally positive on Asia Monday, as the prices of BTC reached 7700 levels over the weekend. The price actions were in-line with our expectations, as our last edition of Technical Weekly pointed out that the neckline of the previous head and shoulders was one of the critical levels for the leading crypto to reclaim for the bulls to continue to run.

As bitcoin halving is expected to due in about two weeks, data suggests that BTC bulls may still have the upper hand in the short term. However, bears have been gradually rising from a medium-term perspective. A survey from Sentix that the Bitcoin Overconfidence Index has jumped to +7, which near the area that could trigger a sell-off.

Manfred Hubner, Managing Director at Sentix, said, “basic confidence still increases with the mood. The risk described is not yet acute. But this can change within 1–2 weeks.”

Figure 1: Sentix Bitcoin Overconfidence Index

Source: Sentix

Figure 2: BTC ATM Implied Volatility

Source: Skew

Interestingly, the BTC options market also seems to point in the same direction. Data from Skew shows that BTC ‘s 1-month implied volatility has been noticeably lower than the 3-month and 6-month implied volatility since April, and the trend has been continuing that way.

Implied volatility is one of the determining factors when it comes to options pricing. Higher implied volatility results in a higher premium of the options and vice versa. In this case, it seems like options traders have been favoring 3-month/6-month (longer-term) BTC options over the 1-month (shorter-term).

We believe this short-term bullishness in BTC is highly related to the upcoming halving. OKEx Head of Quantitative Strategist Thomas Tse suggested that the halving playbook could be “long before halving, short on the halving date, and unwind the final position three days after halving.” Read <Event Arbitrage: How to Trade Halvings> for more.

Elsewhere, we have seen the altcoin space was mostly in the green, with ETH and XRP traded 2% higher, while ADA surged more than 10%. There were increasing discussions around the ETH prices in the markets, as the second-largest crypto has been approaching its multiyear resistance at the same time that Ethereum 2.0 is expected to launch in July. That could be the next big focus for the broader cryptocurrency market after bitcoin’s halving.

Price Analysis

BTCUSDT — Limited room for the bulls, bears may soon takeover?

  • In our previous edition of OKEx Technical Weekly, we highlighted that one of the conditions for BTC to retest the 7700 levels is the price has to stabilize above the last head and shoulders neckline. Now the pair has been trading above the neckline. However, the support of the neckline remained untested, and that could be where traders should eye on as halving approaches.
  • Momentum has apparently to slowing down, as the RSI went flat compared to the previous uptrend. If the indicator is unable to produce some higher highs in the near-term, that could strengthen the bias to the downside.
  • The stochastic oscillator also suggested that bulls may start to look tired, as both the fast and slow lines were already in the overbought zone, where the price had some short-term corrections previously.
  • At the time of writing, even though the 7700 levels seem not fully secured, the bullishness behind the halving could still drive BTC prices toward the 8100 levels. We believe that the first real significant resistance could be near 8140. Such levels were where the lower end of the CME futures hourly gap down on March 9th(not shown here), as well as the 250-day moving average.
  • Still, a short-term correction from here should not be completely ruled out. 7400 could be the first area to watch. If seen, it could increase the likelihood of retesting the neckline near 6900.

Figure 3: BTCUSDT Daily Chart

Source: OKEx; Tradingview

ETHUSD — Hit multiyear resistance ahead of the 2.0 upgrade

  • Ether has been approaching the 200 marks, hitting its long-term weekly resistance, which remained intact since Feb 2018.
  • From a longer-term perspective, the momentum seems to remain healthy, which the stochastic oscillator and the ultimate oscillator both surged above the previous tops. Also, the MACD has produced a weekly bullish crossover, and the crossover seems widening.
  • On the back of the upcoming Ethereum 2.0 upgrade, which markets have been considered as a bullish factor, the pair may able to break above the first resistance. If seen, it could increase the bias of reaching the 220 area.
  • However, it remains too early to determine if the pair will able to break the second trendline.

Figure 4: ETHUSD Weekly Chart

Source: Tradingview

ADAUSDT — Time to turn?

  • Cardano has been one of the altcoin gainers in the Monday Asia session, traded as much as 10% higher against USDT, however, we could see a turn from here.
  • The Stochastic oscillator produced a daily bearish crossover in the overbought zone. The last time that such an event occurred, a heavy sell-off follows. We could also see that from here, if history repeats itself.
  • ADA watchers may also keep a close eye on the development of the RSI. Although it seems able to maintain a higher high, still, it seems unable to go above the 80 levels. This may be another sign of slowing down momentum.
  • The first area to watch: 0.041. If seen, the retest of the 38.2% Fibonacci retracement near 0.0385 should not be ruled out.

Figure 5: ADAUSDT Daily Chart

Source: OKEx; Tradingview

LINKUSDT — Bears keep a firm grip

  • Chainlink may face more downside in the short term as multiple indicators have been suggesting bears have been holding a firm grip.
  • Momentum indicators have long been disagreeing with the price actions in recent weeks, as the RSI produced a quadruple bearish divergence. In other words, as the price produced some higher highs, the RSI did not follow.
  • Trade volume also suggested the same bearish divergence. As the pair traded higher, the volume went lower.
  • A daily MACD bearish crossover seems in the making. If confirmed, that could be another bearish signal.
  • It is reasonable to expect a big move in the price in the near-term, as the Bollinger bands have been squeezing.
  • The first area to watch could be around 2.94 to 2.97, which is the lows earlier this month.

Figure 6: LINKUSDT Daily Chart

Source: OKEx; Tradingview

Originally published at https://www.okex.com on April 27, 2020.




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