Ethereum, XRP, and Litecoin have been contained within narrow trading ranges since the March 12 crash. Technical patterns show these altcoins are getting ready for volatility.
Ethereum Prepares for a Strong Breakout
Over the last weeks, Ethereum has been mostly trading between the $121 support level and the $144 resistance. The low levels of volatility throughout this consolidation period made the Bollinger bands squeeze on ETH’s 12-hour chart.
Squeezes are usually followed by periods of high volatility. The longer the squeeze, the higher the probability of a strong breakout.
From a lower time frame, it does seem like a strong breakout is on the works.
Based on the 4-hour chart, Ether’s price action seems to have developed an ascending triangle. A horizontal line was created along with the swing highs while a rising trendline developed along with the swing lows.
The continuation pattern estimates that breaking above the resistance trendline that sits around $144 could ignite an increase in the buying pressure behind Ethereum. Such a bullish impulse could see the smart contracts giant surge 30% to hit a target of $187.
This target is determined by measuring the height of the triangle at its thickest point and adding that distance to the breakout point.
Even though ascending triangles have the potential to develop as continuation patterns, they can also form as reversal patterns to an uptrend.
A spike in supply that pushes Ether to close below the recent swing low of $124 would allow this to happen. The bearish momentum would likely increase as market participants become aware of the high probability for a 30% nosedive. Upon the breakout point, Ethereum could see its price crash to $98 or lower.
XRP Shows Signs of Recovery
During the recent downturn in the global financial markets, Ripple’s XRP dropped to price levels not seen in the last three years. Although the downswing was devastating for XRP holders, this cryptocurrency was able to rebound quickly and it is up over 65% since then.
Now, the cross-border remittances token appears to be turning its 50-twelve-hour moving average into support which could benefit the bulls.
If this is confirmed, a further spike in demand for this altcoin could see it rise to test the support provided by its 200-twelve-hour moving average. This resistance barrier is currently hovering around $0.22.
The run-up to the 200-twelve-hour moving average could be slow, but steady since the trading volume in most crypto currency exchanges seems to have dropped significantly over the past few weeks, according to Glassnode.
Indeed, the parallel channel developing on the 4-hour chart suggests XRP could continue to consolidate for a longer period of time before it surges to the upper boundary of this pattern. This is also where the 200-twelve-hour moving average sits.
Nevertheless, a sudden move below the $0.17 support level could jeopardize the bullish outlook. The downward price movement could trigger panic among market participants, who are already quivering in “extreme fear,” according to the Crypto Fear and Greed Index.
Breaking below this significant level of support could see XRP plunge to the 61.8% or 78.6% Fibonacci retracement level. These support walls sit at $0.14 and $0.13, respectively.
Litecoin Stands at a Make-or-Break Point
Like Ethereum, the price action seen over the last few weeks squeezed the Bollinger bands on Litecoin’s 12-hour chart.
Since squeezes are indicative of strong breakouts, the area between the lower and upper band is a reasonable no-trade zone. These support and resistance levels sit at $36 and $40, respectively.
The ambiguous outlook that Litecoin presents is better represented in its 4-hour chart. Within this time frame, a symmetrical triangle appears to be developing. This technical pattern reveals indecision among market participants before the price of an asset is forced to move in a positive or negative direction.
The distance between the initial high and low of the pattern forecasts that an increase in the buying pressure behind Litcoin could allow it to surge to over $47. Meanwhile, a sudden spike in supply could see it plummet to $30.
Litecoin’s fate will depend on whether support or resistance breaks first.
Tone Vays, a former Wall Street trader and VP at JP Morgan Chase, believes that now that the total cryptocurrency market cap has dropped over 60%, there are more reasons to be betting to the upside than the downside. Although some of the most prominent analysts in the industry maintain that the downtrend is not over yet, Vays pointed out that the wisdom of the crowd is usually wrong.
“If [a swing low] is going to happen, it needs to happen now, but I don’t think that is possible. I think we will end up making some form of an ascending triangle over the next three to four months and eventually break out,” said Vays.
Along the same lines, “Ugly Old Goat“—a technical analyst who predicted in June 2019 that Bitcoin was going to move below $4,000—argues that all the requirements have been met for the market to reach higher highs. The chartist expects a “slow grinding up move” that accelerates as the Bitcoin’s halving approaches.
Sidelined investors who have been waiting for an opportunity to get back into the market can now “safely” with “little or no adversity” re-enter the market, according to Ugly Old Goat.
While calling for a market bottom during the ongoing global pandemic seems like a bold move, waiting for confirmation before entering a trade could help avoid adverse market conditions.