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Today we’ll cover the Technical Analysis of Bitcoin and Ethereum and discuss some potential trade setups that can play out in the coming week.
Since our last newsletter, Bitcoin and Ethereum have surged by 15% and 10%.
BlackRock’s Domino Effect on Institutions
This upside momentum was due to the previous week’s announcement by BlackRock, the world’s largest asset manager, that it sought approval to list an exchange-traded fund (ETF) for spot-market bitcoin.
This week, the impact of BlackRock's move reverberated throughout the financial world as we witnessed a domino effect of similar applications. Three other tradfi firms Invesco, WisdomTree, and Valkyrie all filed their applications for a Spot Bitcoin ETF within the same week.
The SEC has frequently declined to approve such funds, even though futures-based ETFs are permitted. BlackRock made measures to make its offering appear acceptable to the SEC.
Let’s take a look at the charts I shared with you a week ago.
On 19 June, the BTC price was $26,605
Currently, BTC is trading at $30,430. 15% up from our entry price.
The same case is with Ethereum.
On 19 June, Ethereum was trading at $1745, as shown in the snippet below.
Right now, it’s almost 10% up, and the price is $1892.
Now let’s look at this week’s analysis and where the price could potentially move.
BTC/USD Weekly Timeframe
As you can see, there’s a clear breakout from the trendline, which has been pushing the price down since April.
Since June 2022, the price has been moving in the range of $16,200-$24,300, which broke this week, and BTC is getting close to its next strong resistance at $31,600.
BTC/USD Daily Timeframe
On a daily time frame, the price action is really interesting.
The price action looks like a replica of BTC movement from 17 March- 14 April
BTC took support from $25,411 and touched the nearest resistance range at $31000-$31600.
After forming back to back huge green candles, the price is at halt for the last 3 days.
Bitcoin is meeting significant resistance around 31-32k
If we look at the odds, if BTC has to go down again, it’ll be slow and steady, as there are numerous local support zones for BTC now.
The price levels of $29,800, $27,600, $26000, and $25411 are all support zones in the daily time frame.
In case of dip, as long as the $25400 level holds we can still expect an uptrend.
If the price breaks below $25400, uptrend ends
We can expect either sideways or a bit of correction now after such a huge move, combined with shorts already being liquidated and there is no more shorts bias.
Though we are not expecting a clean breakthrough as price is slowing down, for continuation of this uptrend the BTC price should break out from the major resistance level of $31600-$32000.
Potential BTC trade setups
BTC/USD 4-Hour Timeframe: Trade Setup
BTC price forms a trendline on a 4-hour time frame if the trendline breaks and the price closes below it.
There’s a high possibility the price tests the immediate next support level till $28500.
A short trade with Stop loss at a swing high of $31410 and a Risk:Reward (R:R) ratio of 1:2 would be ideal.
Similarly, if the price closes above the $32K resistance, along till the next support at $33115 would be a strong possibility.
Keep SL at the range low ($31673) and an R:R of 1:2
How to Analyze Long/Short Ratios
Let's quickly take a look at a very useful resource which you can use to make a clear view about the markets.
Long/short ratio is a metric which represents the ratio of long and short positions in the market for a particular asset
Just divide the total number of longs by total number of shorts and you’ll get the long/short ratio
For instance if there are 5 million longs and 2.5million shorts,
the long/short ratio will be 5/2.5= 2
A Long/Short Ratio greater than 1 shows that long positions outnumber shorts, reflecting a bullish attitude.
A ratio less than 1, on the other hand, indicates a bigger number of short holdings relative to long ones, reflecting bearish sentiment.
Look at this Long/Short Ratio chart of BTCUSDT perpetual:
The chart represents a 30 -day period, with each bar symbolizing 24 hours.
The red sections depict short positions while the greens depict long positions.
The white line is a continuous indicator of the Long/short ratio.
On June 26 the BTCUSDT Long/Short Ratio concluded at 1.0101. This implies that 49.75% of accounts holding positions in BTCUSDT were net short, while the remaining 50.25% were net long on the Bitcoin futures contract.
This ratio is useful when you want to get a confirmation about the market sentiments, till now if you were looking at the indicators and other news as your sources of determining market sentiments,
This long/short ratio will help you a lot as it’ll show you the total number of longs and shorts that are opened on various exchanges.
Look at this chart from LONG:SHORT ratio of various crypto exchanges:
Almost on every exchange there’s an equal equation which indicates we may move in a range for some time as there is no particular bias towards one side
A lot of short positions will open and we can see a tough battle between buyers and sellers as they defend their positions.
ETH/USD Weekly Timeframe: Trend Outlook
Ethereum has been in a downtrend since April this year when it made a high on $2140
This week it broke the trendline resistance and is now inching towards the swing high of $2140.
The $1700 mark has served a strong support for Ethereum and now also it has managed to push the price up.
ETH/USD Weekly Timeframe: Medium-Term Support and Resistance
Strong historical support level at between $1600 and $1500, with the wick of the last correction at $1450 being the bottom line support level to hold.
As long as Ethereum continues to hold above $1450 at a high timeframe, the current drawdown remains a correction and the uptrend since January 2023 continues.
Short term Resistance at the trendline around $1940. A clean breakout could signal the end of the correction. Long term resistance at $2136 which was the yearly high made on April 16th. Once this level is broken the price can resume moving upside breaking the downtrend for the past 2 months
Ethereum is still in a downtrend. Once it breaks $1940 and $2136 levels then we can confirm a breakout on the weekly timeframe and this correction would be over.
ETH/USD Daily Timeframe: Trend Outlook
On a daily time frame, ETH has moved from 1700 to 1900 within a week giving more than 11% returns
The price is still trading below the swing high of $2140 which was made in April and is a strong resistance level
If we narrow down further, after a sharp up move and breaking the trendline resistance, ETH price is trading in a 80 points range for the last 4 days.
$1937 is acting as a short term resistance whereas $1863 is acting as a strong short term support.
ETH/USD Daily Timeframe: Short-term Support and Resistance
ETH/USD 4-Hour Timeframe: Short-term Support and Resistance
Potential ETH trade setups
ETH/USD 4-Hour Timeframe: Trade Setup
The daily chart is for a better understanding.
How to Trade Box Breakout Strategy
Before we move on to the trade setup, let’s discuss the ideal way to trade a box breakout
Let’s look at the 4 hour chart closely:
The price is trading in a box range of $1863-$1937 for the last 4 days.
$1937 is the resistance and $1863 is a support which pushes the price up.
The longer price trades in a range, the better breakout you can expect on either side.
Whenever a range breakout happens, no matter on long or short side, it is always better to not enter directly when the breakout is happening because mostly it is a fake breakout which is done by the whales to take the retailers stop loss.
Let’s discuss a situation:
For instance if the upper level of the range which is $1937 is taken out.
Then we’ll wait for the price to touch back the level of $1937 after breaking out and then we’ll enter.
There are a few things you should have clear in your mind before entering a box breakout trade like entry, stop loss, take profit, risk to reward ratio.
In our case these would be as follows:
Entry - $1937
Stop Loss - nearest swing low (nearest support)
Take profit - at least 2x of what you are risking
Favorable 1:2 (if you take risk of 20 points, you aim for $40 in profit)
If the low of the box which is $1863 is taken out, then we’ll wait for the price to come back to the level of $1863 and open a short position keeping all the above mentioned things in mind.
That’s it for a quick box breakout strategy guide. Let me know if you liked it.
Now a breakout on either side of the range will result in a big momentum because as of now just like Bitcoin the Ethereum Long/Short Ratio is equal.
If the move comes on upside and $1937 is taken out, the stop loss of sellers would be triggered and a one sided move might happen
Same is the case if the lower end of the range $1863 is taken out, all the longs will be liquidated and price would fall rapidly.
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