The segment entered a broad correction today in early trading, with the largest currencies erasing a part of their recent lofty gains. The overbought momentum readings that led to short-term sell signals in our trend model are the main reason for the pullback, with no major new catalyst behind the move. The newly established uptrend is not in danger because of the move for now, and we expect the rally to resume after the correction.
With the long-term setups being bullish, investors could use the dip to accumulate the majors, while short-term traders should wait until the overbought readings are cleared before re-entering the market. The recently weaker coins, such as BTC and LTC could gain relative strength during the move, as a sign of bullish rotation.
BTC/USD, 4-Hour Chart Analysis
BTC reached an overnight high near $9800, just shy of the key $10,000 level, before turning lower together with the broader market, and the most valuable coin is now testing the $9000-$9200 zone yet again. The bullish long-term setup is clearly intact, but a test of the $8400 level is in the cards during the current move, with further strong support is found in the area above the $7650 level.
ETH/USD, 4-Hour Chart Analysis
Ethereum, which has been leading the market higher, is now back near the $625 support level after triggering a sell signal yesterday, and given the almost 100% rally off the lows, a drop to the $555 to $575 zone is possible in the coming days as the short-term momentum indicators are still in overbought territory. Further support is at $500, while targets ahead are near $735, $780, and $845.
Correlations Spike Higher as Volatility Returns
The majors are falling in a concerted fashion, as usual, but we expect positive divergences to emerge soon, as the bull run will likely resume after the correction. Volatility is also much higher than in recent weeks, so day-traders should be aware of the heightened risks.
IOTA/USD, 4-Hour Chart Analysis
Although the largest digital currencies are all lower, IOTA was the first to provide a short-term sell signal, and the coin which was leading the market higher before could be among the first to form a bottom. That said, traders should wait before entering new positions here, with support zones found near $1.70 and $1.50.
As the correction is dominantly technical in nature, traders and investors should be looking for reversals near the key levels in all of the coins in the coming days, so stay tuned for our detailed technical analysis coming out later on today.
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Disclaimer: The analyst owns cryptocurrencies. He holds investment positions in the coins, but doesn’t engage in short-term or day-trading, nor does he hold short positions on any of the coins.