The United States equities markets recovered from their intra-week lows last week, suggesting demand exists at lower levels. On similar lines, Bitcoin (BTC) also recovered from $18,910 last week, indicating that traders may be getting back into risky assets.
However, analysts remain divided in their opinion on the recovery in Bitcoin. While some believe that the relief rally is a bull trap, others expect the up-move to retest the crucial resistance at the 200-week moving average ($22,626).
The current bear phase has damaged sentiment as seen from the Crypto Fear and Greed Index, which has remained in the “extreme fear” zone since May 6. According to Philip Swift, creator of on-chain analytics platform LookIntoBitcoin, the time spent in the “extreme fear” category is longer than during the 2018 Bitcoin bear market.
Could the sentiment stage a turn around boosting crypto prices higher? Let’s study the charts of the top-5 cryptocurrencies to identify potential breakout assests.
Bitcoin rose above the 20-day exponential moving average ($20,894) on July 15, but the bulls have not been able to build upon this advantage. The bears are likely to defend the resistance line of the symmetrical triangle with vigor.
The 20-day EMA has flattened out and the relative strength index (RSI) has risen close to the midpoint. This suggests a balance between supply and demand.
The first sign of strength will be a break and close above the 50-day simple moving average ($23,445). That could clear the path for a possible rally to the pattern target at $28,171. Such a move will suggest that the BTC/USDT pair may have bottomed out at $17,622.
Alternatively, if the price turns down and breaks below the 20-day EMA, the pair could extend its stay inside the triangle for a few more days. The price action inside the triangle is likely to be random and volatile. A break and close below the triangle could signal that bears are back in the driver’s seat.
The moving averages have been criss crossing each other for some time, indicating a range formation. The bears will try to pull the price below the moving averages. If they manage to do that, the pair could decline to $20,000. A break below this support could open the doors for a possible drop to the support line.
On the other hand, if the price rebounds off the moving averages, it will suggest that bulls are buying on dips. That could improve the prospects of a breakout from the triangle. The pair could then rally to the overhead resistance at $23,363.
Ether (ETH) completed an ascending triangle pattern when bulls pushed the price above $1,280 on July 16. The bears are currently trying to pull the price back below the breakout level and trap the aggressive bulls.
The critical level to watch on the downside is $1,280. If the price rebounds off this level, it will suggest that bulls have flipped $1,280 into support. That could improve the prospects of the resumption of the up-move. The ETH/USDT pair could then rise to $1,700 where the bears may again pose a strong challenge.
On the contrary, if the price turns down and breaks below the 20-day EMA ($1,206), it will suggest that bears are selling on rallies. That could sink the pair toward the support line of the triangle.
The 20-EMA on the 4-hour chart is sloping up and the RSI is near the overbought zone, indicating that bulls are at an advantage. If the price turns up and rises above $1,423, the pair could pick up momentum and rally to $1,550 and then to $1,700.
Conversely, if the price slips from the current level, the bulls will attempt to arrest the decline at the 20-EMA. This is an important level to keep an eye on because a break and close below it could sink the pair to the 50-SMA.
Polygon (MATIC) completed an ascending triangle pattern when the price broke above the overhead resistance at $0.63 on July 13. This was the first indication of the start of a new uptrend.
The moving averages have completed a bullish crossover, suggesting that buyers have the upper hand. However, the price action of the past few days has pushed the RSI near the overbought zone, indicating that a minor pullback or a consolidation is likely in the near term.
The critical level to watch on the downside is $0.63. If the price rebounds off this support, it will suggest that lower levels are attracting buying by the bulls. That could increase the possibility of the resumption of the uptrend. The MATIC/USDT pair could then rally to the pattern target at $0.95.
This positive view could invalidate if the price turns down and plummets below the 50-day SMA ($0.54).
The recovery rose above the overhead resistance at $0.75 but that pushed the RSI into the overbought zone. This suggests a minor correction or consolidation in the near term.
The bears will try to pull the price below the 20-EMA. If that happens, the pair could drop to the 50-SMA.
Alternatively, if the price rebounds off $0.75 or the 20-EMA, it will indicate that bulls are in control. That will increase the likelihood of the resumption of the uptrend.
Related: Ethereum traders gauge fakeout risks after 40% ETH price rally
FTX Token’s (FTT) price action in the past few days has resulted in the formation of a symmetrical triangle. This usually acts as a continuation pattern but in some cases, it also performs as a reversal setup.
The moving averages are on the verge of a bullish crossover and the RSI has risen into the positive zone, indicating that buyers have a slight edge. A breakout of the resistance line of the triangle will suggest that the uncertainty has resolved in favor of the buyers.
That could indicate the start of a new uptrend which could rise to $32 and later to the pattern target at $36.50. Contrary to this assumption, if the price turns down from the resistance line, the FTT/USDT pair could extend its stay inside the triangle for a few more days.
The 4-hour chart shows that the price has reached the resistance line of the triangle where the bears are expected to mount a strong defense. If the price turns down from the current level but rebounds off the 20-EMA, it will indicate that traders are buying on dips. That could enhance the prospects of a break above the triangle.
This positive view could invalidate in the short term if the price continues lower and breaks below the 20-EMA. That could pull the pair to the 50-SMA, signaling that the range-bound action may continue for a few more days.
Ethereum Classic (ETC) broke out of the $12.50 to $18 range it had been stuck in for the past few days. This suggests that bulls are attempting to form a double bottom pattern.
The 20-day EMA ($15.87) has started to turn up and the RSI has risen close to the overbought territory, indicating that bulls have the upper hand. The critical level to watch on the downside is $18. If bulls sustain the price above this support, the ETC/USDT pair could start its northward march toward $23.50 and then $25.
Contrary to this assumption, if the price turns down and slides below 18, the pair could drop to the moving averages. A break below the 20-day EMA could suggest that the bears remain active at higher levels.
The sharp up-move above $18 has pushed the RSI into the overbought territory. This suggests a minor pullback or consolidation in the near term. The bears will try to pull the price back below the breakout level while the bulls will attempt to defend it.
If the price rebounds off $18, it will suggest that bulls have flipped the level into support. That could increase the possibility of the resumption of the up-move. Alternatively, a break below $18 could strengthen the bears who will try to pull the pair to $16.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk, you should conduct your own research when making a decision.