Large-cap altcoins are trying to rally higher but the first bulls need to flip $ 24,000 in support.
When the price of an asset always reaches a new peak, momentum traders plow as they sense an opportunity to ride the trade higher. The same was seen after the Bitcoin (BTC) price broke above the $ 20,000 mark on December 16. By December 19, the price had peaked intraday at $ 24,197.46, a 21% rally in four days.
These sharp movements in the price of Bitcoin are attracting traders who use derivatives to try to amplify their earnings or hedge their existing positions by buying downside protection. This led to the open interest on Bitcoin options reaching a new all-time high at $ 6.5 billion earlier this week.
While professional traders use complex options strategies to establish their positions, the retail traders generally buy naked options with a dream of unexpected windfall on the options contract. This can be seen from the high open interest at the $ 36,000 strike price and the $ 52,000 demand option.
For each option contract, there is a seller and a buyer and in general, professional traders prefer to sell the option contracts and premium pockets when the expiration is worthless. Retail traders should therefore make informed decisions before buying naked options contracts.
The bullish momentum on Bitcoin has pulled select altcoins higher. Let’s take a look at the charts of top-5 cryptocurrencies that could offer trading opportunities in the coming week.
BTC / USD
Bitcoin picked up momentum after the price broke above the resistance above $ 20,000 but the rapid rise of the past few days has pushed the relative strength index (RSI) deep into the overbought territory. This suggests the possibility of consolidation or correction in the coming days.
Usually, after the price drops above a record high, it turns down and re-tests the breakout level. In this case, the BTC / USD pair can dip down from the $ 25,000 resistance zone to $ 26,000 and retest the breakout level at $ 20,000.
If the price bounces back this support aggressively, the bulls will once again try to rebuild the increase. If they succeed, it will suggest that the new floor for the pair is $ 20,000.
Contrary to this assumption, if the bears sink the price below the 20-day exponential moving average ($ 20,356) and the $ 19,500 support, the pair may fall to the 50-day simple moving average day at $ 17,960.
Although the trend is upward, the 4-hour chart shows that bulls are struggling to maintain the price above $ 23,795.29. This suggests that after the recent sudden movement, the bears are trying to stall the rally. The negative divergence on the RSI is an indication that the momentum may be weakening.
If the price drops below the 20-EMA, the pair could fall to the $ 22,272.63 support. This is an important short-term level to watch out for if it does crack, the short-term traders can command profit. That could quickly bring the price down to the 50-SMA and then to $ 20,000.
This view will be invalid if the price increases and maintains above $ 24,000. Such a move will suggest that momentum traders are in control.
ETH / USD
Ether (ETH) broke out of the ascending triangle pattern on December 16 and the price rose to $ 676.325 on December 17 but the bulls could not sustain the higher levels as seen from the long wiki on the daily candlestick.
However, a positive is that the bulls have not allowed the price to fall below the direct support at $ 622.807. The price is currently stuck between $ 622.807 and $ 676.325.
If the bulls can drive the price above $ 676.325, it could initiate the next phase of the uptrend that could reach the pattern target of $ 763.614. The upward moving averages suggest that bulls have the upper hand.
Conversely, if the bears sink the price below $ 622.807, the ETH / USD pair could fall to the 20-day EMA ($ 599). If the price strongly bounces off this support, the bulls will try to reverse the increase.
The trend will turn in favor of the bears if the price falls below the trend of the triangle.
The 4 hour chart shows a symmetrical triangle formation, which usually acts as a continuity pattern. If the bulls can push the price above the triangle, the pair can resume the uptrend.
Conversely, if the price drops below the triangle, it is possible to reduce the support $ 622.807. If the bears sink the price below the 50-SMA, the pair may lose momentum and fall to the trend line of the triangle.
LTC / USD
Litecoin (LTC) picked up momentum after breaking out of the symmetrical triangle on December 16. The target out of the triangle cut-off target was $ 119.77 and that hit on December 19.
However, the momentum is strongly in favor of the bulls. If the price does not fall below the 50% Fibonacci price at $ 101.868, it will suggest that the bulls are not ordering profits urgently.
A shallow withdrawal will increase the possibility of a rally above $ 124.1278. If that happens, the LTC / USD pair could rally to $ 140.
Contrary to this assumption, if the price drops below $ 101.868, the pair could make a correction to the 20-day EMA ($ 90). A deeper correction will suggest that the momentum has weakened and may result in range binding actions for a few days.
The pair is currently seeing a correction on the 4-hour chart that could reach the 20-LCA. A strong rebound from this support will suggest that the feeling is positive and that bulls are buying on dips. If the bulls push the price above $ 124.1278, the uptrend could resume.
The RSI shows signs of negative deviation. If the price drops and maintains below the 20-EMA, it will suggest that the momentum has weakened and there may be a deeper correction on the cards.
ADA / USD
Cardano (ADA) has been trading inside $ 0.13 to $ 0.175 range over the past few days. The altcoin fell from the overhead resistance on December 17 but the bulls have not surrendered much land. This shows that traders are not in a hurry to order profits.
The increasing moving averages and RSI in the positive territory suggest that bulls have the upper hand. If the buyers can drive the price above the resistance zone above $ 0.175 to $ 0.1826315, the ADA / USD pair could rally to $ 0.22 and then to $ 0.235.
If the price drops down from current levels but bounces off the 20-day EMA ($ 0.154), the bulls will try to rebuild the increase.
Conversely, if the bears sink the price below the 20-day EMA, the pair could fall to $ 0.13 and extend the stay inside the range.
The 4-hour chart shows that the price is currently consolidating in a tight range from $ 0.16 to $ 0.17. The flattened 20-EMA and the RSI just above the midpoint suggest a balance between supply and demand.
If the bears sink the price below the 50-SMA, the pair could fall to $ 0.150 and such a step will increase the possibility of the range-bound action continuing.
On the other hand, if the pair rises above $ 0.17, the bulls will try to push the price above the $ 0.175 resistance zone to $ 0.1826315. If they succeed, the uptrend could resume.
BNB / USD
Binance Coin (BNB) had been stuck in a $ 25.6652 to $ 32 range over the past few weeks. The bulls pushed the price above the resistance above on December 19 and have followed that with another increase today.
The BNB / USD pair is currently reaching the resistance above $ 35.4328 where the price reversed direction on November 25. If the bulls can push and maintain the price above this resistance, it is possible to re-test ‘ r highest ever at $ 39.5941.
The 20-day EMA ($ 30) has begun to turn up and the RSI is near the over-thinking zone, which suggests bulls have the upper hand. If the bulls can push the price above $ 39.5941, the uptrend could continue, with the next target being $ 50.
This bullish view will be invalidated if the price drops down from current levels and drops back below $ 32. Such a move will suggest a few more days of consolidation.
The 4 hour chart shows that the bulls pushed the price above the overhead resistance but could not sustain the higher levels. This suggests that the bears are aggressively defending the $ 35.4338 level.
However, the upward moving averages and the RSI in the over-thinking zone suggest an advantage for the bulls. If the bulls do not allow the price to slip below $ 33.3888, it will increase the possibility of a break above $ 35.4338.
Conversely, if the bears sink the price below $ 33.3888, it is possible to lower the 20-EMA and then to $ 32.
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.