Cryptos: Short Covering Rally or Breakout?
The beginning of 2018 has been no less than disastrous for crypto traders. Social Media outlets formerly ablaze with hashtags like #lambo, #tothemoon, and more suddenly went silent on this topic.
Every crypto market attempting to recover was struck down by massive quantities of sell orders. Traders thinking they entered at unheard of prices watched in disbelief as wave after wave of sell orders pulled their positions deeper into the red. Finally, on April 12th, after most crypto traders had retreated into hiding, our prayers were answered and we saw a dramatic drop in BTC short contracts followed by a $1000 spike in BTCUSD, amounting to almost a 15% gain in one day.
After being battered for nearly 2 months, crypto traders were understandably skeptical. Was this just a massive short covering rally as traders took profits from their positions? If so, we'd expect to see another massive wave of sell orders come through. But no such wave ever happened. In fact, Bitcoin has continued to appreciate, at one point flirting with the $10,000 handle once again.
Currently, we appear to be forming a bull flag pattern which suggests another breakout is nigh. Momentum has returned to the favour of the bulls, so we can anticipate that our breakout will be bullish. Short term momentum has waned, which indicates current levels might present good entry prices. Check out my tutorial on momentum trading if you want to learn more.
If things go south, we can expect support from Fibonacci levels at $8.3K, $7.9K, $7.3K, $6.8K and $6.4K. Otherwise, we can expect BTC to establish $10K once more and $11K should follow once again soon.
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