Nick Chong · 8 hours ago · 2 min read
Disclaimer: This article contains technical analysis, which is a methodology for forecasting the direction of prices through the study of past market data, primarily price and volume. The content presented in this article is the opinion of the author. None of the information you read on CryptoSlate should be taken as investment advice. Buying and trading cryptocurrencies should be considered a high-risk activity. Please do your own diligence and consult with a financial advisor before making any investment decisions.
One of the most popular technical indexes among traders suggests that some of the top altcoins by market capitalization—including Ethereum, Litecoin, Binance Coin, Cardano, Monero, Dash, and Ontology—are on the cusp of high volatility.
The next major price swing
Over the last week the cryptocurrency market entered a consolidation period following a steep market decline on Sept. 24.
That day approximately $50 billion was wiped out from total crypto market capitalization, representing a 20 percent plunge from a high of $250 billion to a low of $200 billion. Meanwhile, Bitcoin saw its price plummet over 17 percent flashing a potential move to $6,500.
Now, the market seems to have stabilized within a trading range and a particular indicator is signaling that a period of high volatility is on the horizon.
The Bollinger bands, a technical analysis tool defined by a set of two standard deviation lines and a simple moving average, appears to be squeezing on the 4-hour charts of some of the top cryptocurrencies by market capitalization. Squeezes are indicative of periods of low volatility and are typically succeeded by periods of high volatility. The longer the squeeze the higher the probability of a strong breakout that defines the direction of the trend.
This technical index does not necessarily specify whether a given cryptocurrency will move up or down. Nonetheless, a series of support and resistance levels can be drawn to help simplify possible bearish and bullish scenarios.
Bearish or bullish?
Ethereum, for instance, is currently sitting in a no-trade zone. This area is defined by the lower and upper Bollinger band that sit around $166.70 and $182.80, respectively. Trading within these support and resistance levels poses high risk exposure. Therefore, as the Bollinger Bands continue squeezing on ETH’s 4-hour chart, it will be wiser to wait for a clear move outside of this range. A break below $166.70 could take this cryptocurrency to test the next levels of support around $157 and $147. Conversely, a move above $182.80 could allow Ethereum to surge up to the $195 or $205 resistance level.
Along the same lines, Bitcoin Cash has mostly traded between $214 and $232 since Sept. 25. This is a reasonable no-trade zone as a break outside of this area will likely be followed by a strong price impulse. So, if BCH moves below $214 it may hit the next price barrier at $173.50 or $145. On the other hand, a spike in volume that lets this cryptocurrency rise above $232 could take it to $271 or even $292.
Litecoin is also trading between the same support and resistance levels after the 25 percent drop that it experienced on Sept. 24. In fact, this cryptocurrency has not been able to move below $53 or above $57.70 since then. Consequently, breaking the current support level could push LTC further down to $49 or $44, but if it breaks above resistance it could raise up to $64 or $71.
Despite the different announcements that Binance made recently, its native currency is consolidating like the rest of the market. At the moment, Binance Coin is moving between $14.70 and $16.40, but breaking through this zone will determine where it is heading next. On the upside, the next price hurdles sit at $18.30 and $20. On the downside, however, the next resistance levels are are around $12 and $10.
The Bollinger bands are also squeezing on Bitcoin SV’s 4-hour chart. While the lower band sits around $80.50, the upper band sits around $89.50. As long as this technical indicator continues squeezing the action between these price points can be considered as a no-trade zone. Breaking below it could take BSV down to $74 or $64.50. Meanwhile, an increase in the buying pressure behind this cryptocurrency could take it to $111 or $127.80.
Moreover, as Cardano slowly transitions into proof-of-stake (PoS) consensus its market valuation continues consolidating between $0.036 and $0.040. ADA’s next major price swing will depend on its ability to trade outside of this trading range. Falling below $0.036 could take it to $0.031 or $0.028 while surging above $0.040 will likely let it test the $0.043 or $0.048 resistance level.
Monero’s 4-hour chart tells a similar story. Currently, this privacy coin is inside a $4 no-trade zone between $54.60 and $58.60. A spike in the selling pressure behind XMR could cause it to plunge to $50 or $44.80. On the other hand, jumping above $58.60 could let Monero rise to $66.40 or $71.
Dash also awaits a spike in volume that allows it to breakthrough the consolidation phase that began on Sept. 25. For this cryptocurrency, moving below $66.80 could imply a further correction down to $59 or even $52. Conversely, moving above $73 will likely bring the necessary volume to take it up to $79 or $87.
Ethereum Classic appears to be signaling a retracement to the lows of December 2018. However, it will be wiser to wait for a clear direction of its trend before entering a trade. As its market valuation remains between $4.45 and $4.90, the Bollinger bands on ETC’s 4-hour chart will continue squeezing. Moving below support could take it down to $4.20 or $3.80 while moving above resistance could take it up to $5.45 or $6.
Finally, Ontology’s price action is behaving similar to the cryptocurrencies previously analyzed. This crypto has been contained between $0.626 and $0.570 since Sept. 25. An increase in the selling pressure behind ONT could take it to $0.504 or $0.447. But, if it breaks above $0.570 it could likely surge to $0.685 or $0.774.
The market decides
As seen in this technical analysis, some of the top cryptocurrencies by market capitalization are all trading within narrow ranges. Under these conditions it is unknown the direction that the market will take. Therefore, it will be wiser to wait for a clear break of support or resistance before entering any trade.
But, based on the Bollinger bands it seems like a break could happen soon. This technical index is in its squeezing stage throughout the charts analyzed, forecasting a period of high volatility. As the market decides where it will be heading next patience will play a key role for traders who want to benefit from the next major price swing.