Cryptocurrencies staged another set of strong rallies recently but are now back in consolidation mode. What’s next: continuation or correction?
Bitcoin made an upside break from the symmetrical triangle pattern highlighted last week, confirming that bulls are still charging. Price is back in consolidation mode after the sharp climb, forming what appears to be a bullish flag continuation pattern.
A break above the latest high around $8,958.25 could spark another rally of the same height as the flag’s mast. A drop below the lows, on the other hand, could be followed by a correction to the Fib levels marked above. The 38.2% level lines up with the 100 SMA dynamic support while the 200 SMA is closer to the 50% Fib.
A larger correction could lead bitcoin to retreat to the bottom of the rising channel around the 61.8% Fib or the $8,000 major psychological mark.
Ethereum also broke above its triangle consolidation pattern last week but hit a ceiling at the top of its range. A pullback could last until the newly-forming short-term rising trend line that lines up with the 100 SMA.
This faster moving average is still above the 200 SMA, so support might be more likely to hold than to break. If sellers have more energy, they could drag ethereum to the bottom of the range around $232.25. Stochastic is on middle ground but appears to be turning lower to signal a return in bearish pressure.
Litecoin made one rally after another and could be poised for yet another one. After all, the 100 SMA is safely above the longer-term 200 SMA to indicate that the path of least resistance is to the upside or that the climb is more likely to resume than to reverse.
Stochastic appears to be heading lower without reaching the overbought region, though, suggesting that sellers are eager to return. This could spur a correction to the 50% to 61.8% levels that span an area of interest or former resistance.
XRP already seems to be in correction mode as it heads for the 50% Fib level on the 1-hour time frame. A larger pullback could draw support from the 61.8% Fib that lines up with the bottom of a potential ascending channel.Bears could have plenty of time to stick around since stochastic is just starting to head south from the overbought zone. A break below the Fibs could trigger a reversal from the short-term climb, but the 100 SMA is above the 200 SMA to suggest otherwise.
Just be warned, there is a considerable amount of risk in trading cryptocurrencies due to their inherent volatility and sensitivity to headlines. Be careful out there!