Crypto Pullbacks Still Look Corrective, With Long Positioning Being Reduced

Macro vs Technicals

While the macro environment remains complicated, the recent higher inflation readings out of the UK and the stronger than expected US PMI readings keep the focus on central banks still in tightening mode.

However, this has not impacted US equities at this stage. So, despite technical warning of another pullback, it is hard to see what triggered the sharp reversal in crypto, but once it got going it triggered long liquidations as Dalvir highlights.

At this stage, technically the pullbacks still look corrective within the underlying new bull phase, and long liquidations are generally a healthy outcome for a bull trend as investors look to get back in. As the old commodity adage goes, ‘you need to feed a bull, but a bear will fall under its own weight’. 

Ethereum vs Bitcoin

The aggressive reversal from 0.062, back through the March breakout level suggests we are returning to the previous range environment. However, in the near term, we are in a correction phase of that reversal.

As such, my studies suggest we can still see a pullback into Fibonacci support between 0.065 and 0.064. From there, we should look for a higher low to develop and a return up to the old triangle highs around 0.070-0.075.

Bitcoin

The well highlighted break of 30,000 has now seen the bitcoin price move into another correction phase, which my studies were warning of last week. As of writing, this is testing upper support in the 28,000-26,500 region.

Daily momentum studies are now fully unwound from overbought. As such, the downside should be limited to this zone, a higher low should develop, and the next rally phase should take hold again in the coming week or so. A decline through 26,500 would be the first alarm bell, while a further decline through 25,400 would suggest 31,000 was a more significant peak than my studies currently suggest and risks a broader pullback to 20,000-18,000 again.

Longer term, my studies suggest the bear cycle from the 2021 highs completed last year around 15,500.

First targets and resistance in the bull move lies in the 33,000 region. But the main target is 36,000, that being Fibonacci and the head and shoulders projection. I suspect we see that region hold on the first test, but ultra long-term targets are 42,000-48,000.

Ethereum

As with bitcoin, but in a far more aggressive fashion this week, ethereum has also reversed into another correction phase from just ahead of 2166 resistance. The micro term decline here looks to have developed in 5-waves and suggest this week’s move was an A wave of a broader correction.

As such, the risks are that rebounds are limited before a test into Fibonacci and previous range high resistance in the 1800-1700 region. That should provide decent support for a higher low to develop, while a breakdown through there would increase the risk that the 2088 high from mid-April is more significant peak than my studies currently suggest –risking a move back to around 1400 again.

Longer term, the reversal from last year’s lows targets ~2400/2450 resistance, but through there can extend towards 3000-3300.

Robin is a global market veteran, with over 30 years of experience on the sell and buy-side, as a strategist and trader. He now provides strategic trading and investing advice to hedge funds, family offices, HNW individuals and trading desks around the globe.

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(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)