It appears from XRP price action that it is being squeezed into a tight area in between strong support and resistance lines, and that it will break out of this squeeze but it's difficult to predict in which direction. This is known as the squeeze play. However, I analyzed and found more reasons for a bearish move.
The bearish case:
First let us examine the resistance above the current price. There are five lines in order from close to far:
Now here are my arguments for the bearish case:
So there you go, three strong arguments for the bearish case. And even if the price breaks through the first three resistance lines, it will still be resisted by the formidable 9400 satoshi line.
The bullish case:
I tried defending the bullish case, but the only excuse I could find is a short squeeze that will spike the price up to the nearest resistance (9400 satoshi) only to go down as fast.
There are also support lines shown in the chart, but they are farther than the resistance lines above. Therefore I believe that the bearish case is stronger.
The bearish case:
First let us examine the resistance above the current price. There are five lines in order from close to far:
- the recent falling trend line that broke started on 24 December 2018,
- the 50-day moving average which is even closer than the 15-day (for now),
- the 15-day moving average which will come down quickly in the next two days,
- the 9400 satoshi line,
- and the recent rising trend line
Now here are my arguments for the bearish case:
- The 15-day and 50-day moving averages will meet---if the price continues to squeeze between the falling trend line and the 8950 satoshi line---and they will form a death cross either tomorrow 10 Jan or the day after. On the death cross, the price will fall only to be supported by the combination of the 7500 satoshi line together with the 200-day moving average.
- On top of that, the falling trend line together with the 8950 satoshi line form a descending triangle.
- There is also a reverse flagpole pattern forming, the pole spans from 3 to 6 Jan and the flag starts on 7 Jan.
So there you go, three strong arguments for the bearish case. And even if the price breaks through the first three resistance lines, it will still be resisted by the formidable 9400 satoshi line.
The bullish case:
I tried defending the bullish case, but the only excuse I could find is a short squeeze that will spike the price up to the nearest resistance (9400 satoshi) only to go down as fast.
There are also support lines shown in the chart, but they are farther than the resistance lines above. Therefore I believe that the bearish case is stronger.
Trade active:
Wow that is exactly what I wished would happen. Now after the long spike upwards took out many leveraged shorts, the price can freely fall all the way to the 200-day moving average. And the pin bar is another strong bearish sign.
So no we enter a short position with the stop loss at the top of the pin bar.
However, in BitMex, we see this even longer wick downwards which means more leveraged longs were taken out.
I also found a descending triangle.
Let's wait for the candle to close before making any more decisions.
So no we enter a short position with the stop loss at the top of the pin bar.
However, in BitMex, we see this even longer wick downwards which means more leveraged longs were taken out.
I also found a descending triangle.
Let's wait for the candle to close before making any more decisions.
Comment:
OK. The price is respecting the falling trend line. Now I'll talk about the death cross of the 15-day and 50-day moving averages. The perfect scenario is that price touches the death cross, because when it does so, it is more probably to give us a big red candle. So we would like for the price to stagnate in this area for three days before it breaks the 8950 support. However, if it does stagnate then it will have to break above the falling trend line, and then that line will act as additional support, albeit weak and insignificant on higher time scales.
On the other hand, if price respects the falling trend line, then the death cross will occur sooner than three days from now, and the price will have been lower than the death cross making it less effective. If this happens then there is no guarantee for further falling and it's hard to predict the picture then. So we will have to wait and re-analyze.
I hope for the first scenario but the market never really gives you what you hope :)
Good luck.
On the other hand, if price respects the falling trend line, then the death cross will occur sooner than three days from now, and the price will have been lower than the death cross making it less effective. If this happens then there is no guarantee for further falling and it's hard to predict the picture then. So we will have to wait and re-analyze.
I hope for the first scenario but the market never really gives you what you hope :)
Good luck.
Comment:
Chart for previous comment.
Comment:
Even better chart
Comment:
Update: Price has bounced off of the 8950 line. And today's green candle is in our favour because we are coming closer to the death cross which makes it more effective. We would like tomorrow's candle to continue going up and touch the death cross. With that we can have enough momentum downwards to cross the 8950 support. The falling trend line pointed out in the attached chart might slow down the fall, but that is doubtful given that it is weaker than the would-have-already-broken 8950 line.
Comment:
The death cross occurred, but we couldn't go all the way up to meet it. This lessens its bearish effect. But we are still in a tight are between support and resistance. We need to break and close below 8950 Satoshis to confirm the bearish momentum. On the other hand, to cancel this trade and consider going bullish, we need to break and close above 9400 Satoshis. So the situation now is not ideal, and it's hard to set a stop loss, but it would be wise to reduce your position and then increase once we've seen the bearish confirmation I just mentioned.
You might think it's foolish to exit a short position at 9100 and then re-enter it at 8900. But this is how risk management is done. Once we have a bearish confirmation then we are much more probable to go down to the next support at 8500 Satoshi.
In addition to that, since the overall trend is bearish, a bullish move on the daily scale is highly probable to stop and reverse at 9400, which gives an even better place for entering a short trade. In both cases, I recommend reducing the short position until a bearish confirmation or a reversal off 9400 shows.
You might think it's foolish to exit a short position at 9100 and then re-enter it at 8900. But this is how risk management is done. Once we have a bearish confirmation then we are much more probable to go down to the next support at 8500 Satoshi.
In addition to that, since the overall trend is bearish, a bullish move on the daily scale is highly probable to stop and reverse at 9400, which gives an even better place for entering a short trade. In both cases, I recommend reducing the short position until a bearish confirmation or a reversal off 9400 shows.
Comment:
XRP has seen dull action in the past week. The drop didn't have enough momentum to break the 8950 support, so it might go up to meet the 50-day MA only to reverse with enough momentum to break the 8950. Therefore the stop-loss should be above the 50-day MA. Or if wanting to open a short position on a stop, then it should be below 8950.
Regarding my previous points for the bullish case, I missed one. Looking at my previous two predictions on XRP (www.tradingview.com/...ing-traingle-in-XRP/) and (www.tradingview.com/...folding-mid-January/), we can see that every time I predict a movement on XRP, it does the opposite!! Therefore, this is one argument for the bullish case this time since I am inclined towards bearish...