A range break from Bitcoin could trigger buying in ADA, ATOM, FIL and EOS this week
The decline in US stock markets last week extended the market-wide losing streak to three consecutive weeks. The Nasdaq Composite fell for six straight days for the first time since 2019. The market’s negative reaction to an apparently positive jobs report in August suggests traders are nervous about the Federal Reserve’s future steps and its effects on the economy.
Weakness in the US stock markets pulled Bitcoin (BTC) back below $20,000 on September 2nd and the bears stayed below that level over the weekend. This pulled Bitcoin’s market dominance to just under 39% on September 4, its lowest level since June 2018, according to data from CoinMarketCap.
Although sentiment remains negative and it is difficult to call a bottom, investors who believe in the long-term prospects of cryptocurrencies can take the opportunity to gradually build positions at lower levels instead of trying to bottom out. However, investors can avoid chasing higher prices during bear market rallies and look to buy when price drops to strong support levels.
If Bitcoin recovers, select altcoins could move higher. Let’s study the lists of top-5 cryptocurrencies that look strong on the charts.
BTC/USDT
Bitcoin has been trading in a tight range between $19,520 and $20,576 in recent days, showing a balance between buyers and sellers in the near term. Although bulls are buying on dips, they have not been able to overcome selling at higher levels.
The descending 20-day exponential moving average ($20,863) and the relative strength index (RSI) in the negative territory indicate benefits for sellers. If bears lower the price below $19,520, the BTC/USDT pair may fall to the strong support zone between $18,910 and $18,626.
This zone is likely to attract strong buying from the bulls, as it has been the case on two previous occasions. The bears need to lower the price below $17,622 to signal a resumption of the downtrend.
On the other hand, buyers will need to push and sustain the price above the 20-day EMA to indicate that the bears may be losing their grip. The pair could then rise to the 50-day simple moving average ($22,271).
The price bounced back from the strong support near $19,520, but the bears are trying to stop the recovery at the moving averages. This shows that bears sell on every minor rally. If bears lower the price below $19,520, the pair could resume the next leg of the downtrend.
Contrary to this assumption, if bulls push the price above the moving averages, the pair may attempt a rally to the resistance in the $20,576 area. Buyers need to clear this obstacle to signal a potential trend change in the near term.
ADA/USDT
Cardano (ADA) is in a consolidation, but it is trying to rise above the moving averages. This indicates demand at lower levels and increases the chances of an up move, which is the reason for the pick.
The 20-day EMA ($0.47) has flattened and the RSI has jumped into positive territory, indicating that selling pressure is easing. If buyers sustain the price above the 50-day SMA ($0.50), the ADA/USDT pair may rally to the downtrend line.
This level could again act as a strong resistance, but if bulls overcome this barrier, the pair could rise to $0.70.
This positive view may be nullified in the short term if the price declines from today’s level and falls below the 20-day EMA. If that happens, the pair could again slide to the strong support at $0.40.
The 20-EMA on the 4-hour chart is sloping up and the RSI has risen into overbought territory. This indicates that bulls are in command, but a minor correction or consolidation is possible in the short term.
If buyers sustain the price above $0.48 or the 20-EMA, it would suggest a change in sentiment from selling on the rally to buying on the dip. It could push the price to $0.54 and later to the downtrend line.
To invalidate this bullish view, bears need to pull the price below $0.48. If that happens, the pair could slide to $0.44 and then to $0.42.
ATOM/USDT
Cosmos (ATOM) has not given up ground in recent days and is trading near the overhead resistance at $13.45. This indicates that traders are not closing their positions as they expect the price to go higher. This is why it is included in this list.
The ATOM/USDT pair dipped below the 50-day SMA ($11.08) on August 29, but bulls bought at lower levels. It started a pullback that reached the overhead resistance at $13.45. The gradually rising moving averages and the RSI in the positive territory indicate that the path of least resistance is up.
If buyers drive the price above $13.45, the pair could gain momentum and rise to $15.30 and then to $20. This bullish view could be invalidated if the price declines sharply and plunges below the psychological support of $10.
The 20-EMA is sloping up and the bulls are buying dips to this support. This suggests a positive mood in the short term. The bulls will attempt to push the price to the overhead resistance at $13.45. This is an important level to keep an eye on because a break and close above it could indicate resumption of the up move.
Conversely, if the price breaks down from the current level or overhead resistance and breaks below the 20-EMA, it will suggest that bears are active at higher levels. The pair may then remain bounded between $10 and $13.45 for a while.
Related: Surge or purge? Why The Merger May Not Save Ethereum Price From ‘September Bear’
FILE/USDT
Filecoin (FIL) had been trading in a tight range between August 27th and September 2nd, which resolved to the upside on September 3rd. An expectation that buyers can continue their purchases led to the choice of this coin.
The FIL/USDT pair performed strongly, breaking above the 20-day EMA ($6.39) on September 3. This is the first indication that buyers are trying to come back. However, the bears are unlikely to surrender easily and they pose a strong challenge near the 50-day SMA ($6.92).
The bears pulled the price back below the 20-day EMA on September 4. If they sustain the price below this level, the pair could fall to $5.50. Conversely, if the price turns up from the current level and breaks above the 50-day SMA, it would suggest strong buying on the downside. The pair could then rise to $9 and then to $9.50.
The pair rejected from the overhead resistance zone between $6.80 and $6.60, but a minor positive is that the bulls have not allowed the price to fall below the 20-EMA. If the price pulls back from the current level, the possibility of a break and close above the zone increases.
If that happens, the pair will complete an inverse head and shoulders pattern. The pair may then gain momentum and rally towards the pattern target of $7.6 and later to $8.30.
This positive view may be invalidated in the short term if the price breaks and closes below the 20-EMA. The pair could then fall to the strong support at $5.50.
EOS/USDT
EOS has made the list because even in the chaos it has managed to stay above the moving averages. This indicates short-term outperformance and increases the likelihood of a rally if sentiment in the cryptocurrency sector improves.
The EOS/USDT pair completed a rounding bottom pattern on August 21, but the bulls could not sustain the higher levels. The bears pulled the price back below the August 28 breakout level, indicating strong rally selling.
A minor positive is that buyers aggressively bought the decline to the 50-day SMA ($1.33). The 20-day EMA ($1.48) has flattened and the RSI is near the midpoint, indicating a balance between buyers and sellers.
This balance could tip in favor of the bulls if they push and sustain the price above $1.60. The pair could then rise to the overhead resistance near $2. Alternatively, a break and close below the 50-day SMA could open the door to a possible drop to $1.15.
The bears sold the pullback near $1.60 and are trying to pull the price back below the $1.46 breakout level. If they do, the pair could fall to the uptrend line. This level has acted as a strong support on three previous occasions, therefore the bulls will again try to defend it.
If the price pulls back from the uptrend line and breaks above $1.60, the pair could gain momentum and increase to $1.80 and later to $2. Conversely, a break and close below the uptrend line would indicate that the short-term uptrend may be over. The pair could then fall to $1.24.
The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trade involves risk, you should do your own research when making a decision.
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