Cryptocurrencies: Buy the dip
The longest and most powerful bear market in cryptocurrency history was a strong ‘short the spikes’ environment. Current market and participant behavior suggests any big dips are being bought – indicating a change in the overall behavior.
Crypto market recovering nicely after biggest drop in 3 weeks
Cryptocurrencies experienced a significant drop near the end of the trading day on Thursday. According to coinmarketcap.com’s aggregate crypto data, the entire market lost around -2.27% for the day. This would mark the third time in 30 days that bears have attempted to continue a selloff with a single (or few well capitalized) massive drop over a short period of time. The first time this happened was on February 24th, 2019 when the market lost over -10% of its value. However, strong buying and volume came in to support price and the market traded sideways until the second test lower. That second test happened on March 4th with a -2.79% drop. And again, buyers stepped in to support price. Ever since those two dates, the entire cryptocurrency market has been establishing some very strong bullish behaviors.
While traders and investors have yet to bring the aggregate market cap beyond the 2019 high on February 24th, volume has been rising. In fact, the volume on the Friday trade is nearly the same volume as when the market cap topped out back in January of 2018. This is an extremely important piece of technical information. Volume, as the saying goes, precedes price. If that saying is true, then this massive influx of volume is a sign of some extremely high price moves here in the near future.
In addition to the massive influx of volume, we should take note of how the entire market is behavior within the Ichimoku system. The last time the entire cryptomarket had a bullish break of the Kumo (when price and the Chikou Span are both above the cloud) happened on October 8th, 2017. That’s 17 months since there was a daily buy signal on the Ichimoku system. That’s just crazy. For any instrument, that is crazy. The question here is this: will prices remain bullish? So far, the conditions look good. The daily Tenken-Sen is above the Kijun-Sen and price is currently above both of those lines – bullish. Additionally, the Kumo ahead is green (Senkou Span A is greater than Senkou Span B). It would be ideal with the Future Senkou Span A was slopping up instead of down. The piece of the Ichimoku system that most concerns me is the current level of the Chikou Span. On the current daily chart, the Chikou Span is trading inside the candlesticks. Until the daily candle closes, we won’t see the Chikou Span above the candlesticks until tomorrow. So unless there is some massive dump over the next 5-6 hours, the next daily candlestick should show the Chikou Span above the candlesticks. Not only that, but it will be in ‘open space’ – meaning that it won’t intersect or intercept any daily candlesticks over the next 5 to 10 days.