by Jamie Holmes
Cryptocurrency markets have continued their upward surge on May 5, with BTC-USD posting a fresh high at $1623.01 on the Bitstamp exchange, while ETH-USD peaked at $97 on Kraken. The price of bitcoin has been boosted by its highest ever volume in a 24-hour period, surpassing $1 billion.
Some of the top volume bitcoin pairs are XRP-BTC, ETH-BTC, LTC-BTC and XLM-BTC on Poloniex, suggesting that the rise of altcoins strengthens bitcoin’s position as a gatekeeper to the cryptocurrency world.
The chart below shows the 4-hour price action for BTC-USD. On May 4, bulls exerted their control of the market, taking the cryptocurrency to a new all-time high at $1623.01 before dropping below $1500 to $1444.94 and then regaining this psychological level afterward. The price action has dipped back down below $1500 on May 5, but sellers were only able to push the market as low as $1496.07. The higher lows suggest that the uptrend will continue.
Also shown below are the key Fibonacci retracement levels. We see that the 23.6 percent Fibonacci level held as resistance on May 4 and a fractal buy level was formed at $1444.94, suggesting we may see the market extend to the first Fibonacci extension level at $1758.98.
The market currently stands just below the 61.8 percent Fibonacci retracement level at $1538.97, which provides immediate resistance. On the other hand, immediate support is found at $1513.01, the 50 percent Fibonacci level. We could place limit orders on either side of these levels to take advantage of a breakout.
The Ichimoku indicator suggests that we will see sideways price action, as the conversion line (blue) and base line (red) are horizontal. The conversion line provides resistance at $1533.97 and a 4-hour session close back above this level will point to a bullish outlook.
However, if the market remains below $1533.97, we should see the market test the support provided by the base line, at $1484.69. Sell positions could also target the Ichimoku cloud area round $1360-$1410. Bearish confirmation will be given if the conversion line starts to trend lower and ceases to be horizontal. Alternatively, if we observe the conversion line start to trend higher, an upward move is to be anticipated.
The daily chart for BTC-USD is displayed below and we see that today’s price action, which has ranged between $1609.00 to $1496.07, is most likely a result of manipulation to shake out participants before moving higher. For instance, notice that the candlestick for May 4 was a bullish spinning top, suggesting that we are halfway through this bullish trend. While this particular pattern indicates indecision, notice the bullish candlesticks preceding this one, suggesting buyers remain in control.
Secondly, notice that the Market Facilitation Index for May 5 is blue, known as a fake, which signals that no new positions should be taken and that those with long positions in bitcoin should not worry, where can effectively ignore the price action today.
A fractal resistance does not look to form at the new all-time high $1623.01, since today’s price action has formed a higher low at $1496.07 compared to May 4’s low at $1444.94. Also, notice that the conversion line was tested as support on May 4 and the market managed to move much higher, closing the day at $1537.23.
We anticipate a move back toward equilibrium, as indicated by the Ichimoku cloud, if the market moves below the $1431.02, the low of May 3.
ETH-USD broke above the Fibonacci resistance at $84 on May 4, opening up a move to $132.58. The weekly price action for ether is displayed below and a weekly close above $84.61 will give further confirmation. The Market Facilitation Index signals a ‘squat’ for the week, suggesting the market is getting ready to jump to higher highs, namely the Fibonacci extension level at $132.58. The bullish outlook and move higher is also supported by higher volume on the Kraken exchange as compared to the week beginning April 24.