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In the last week a few things have been unfolding in the Crypto markets which triggered my interest in the Altcoin market and I'm starting to lean towards a new Altcoin cycle coming up very soon!
In this article I'm going to explain my thought process regarding:
- What triggered my interest
- How I'm going to time and plan my entries on the Altcoins and what tools I'm using to plan it out
What triggered my interest?
Let's start with the Bitcoin dominance chart
Bitcoin Dominance has been in an very clear and steady up-trend since January 2018 with some small pullbacks but mostly they were just
accumulation periods followed by another strong move up. In these accumulation periods we have had our selected pumps on Altcoins which we were able to play fairly well but we haven't seen any serious Altcoin cycles in the last few years!
But now.. some interesting things have been happening
- For the first time a long period of sideways movement is breaking down instead of it being the accumulation period before the next leg up.
- This breakdown happened at the weekly resistance & range high
- Price went sideways above the Range High and broke down leaving the price action above as Deviation
- Price just gave the range high / resistance a bearish retest after the close back inside the range
(Price tends to move pretty aggressively towards the opposite side of a range after a deviation.)
- Retests of the range high/low AFTER the deviation are for selling/buying. *
*If you look back at the price action in 2018 where we've had a small but good relief period on Altcoins which in hindsight just was the bullish retest for Dominance at the range low after a deviation. This was the time to sell your Altcoins and where the big bear market started for Altcoins / where the big bull run started towards the opposite side of the range for Bitcoin Dominance.
Sentiment by then: People where calling for continuation in the Altcoin bullmarket and not many people sold.
Currently we're facing pretty much the same situation but at the opposite side of the range. Price deviation above the range high followed by a break back inside the range leaving the price action above as a deviation. Currently we are having a similar retest as at the bottom in 2018. Retesting the range after the deviation. Back in 2018 the retest was for selling. Will it be for buying now?
Sentiment now: Zero interest in Altcoins
Bitcoin Dominace chart
Besides the Dominance I've been looking a lot at the Major Altcoins
A lot of people tend to only look at the Binance chart on Tradingview where coins like Litecoin / Bitcoin looking like they're in bearish price discovery without any support left, while on charts from exchanges with the full price history they are actually at THE range low where all the major upmoves started from!
Example Litecoin's Monthly chart on Bittrex where she's sitting right at the historical support. Litecoin has been one of the leading Altcoins more than once.
If you zoom in to the lower time frames / Daily price action you can see that there's another range being formed at the Monthly range low. Currently it's looking pretty strong and more important she's sitting at the range low here as well. The Risk/ Reward for these Altcoins here is very high.
Next.. I want to have a quick look at some of the Altcoin / USDT pairings which are showing serious strenght at the moment, and are doing this around their huge range low / support levels.
Let me give you some examples:
- BAT / USDT
Reclaim of the Range low / key support
- DOGE / USD
Reclaim of the Nov'18 Range low
- EOS / USD Monthly
* Took out the low of 2019 which was the start of some great relief
* Hit the origin of the huge 2017 bull move
Let's zoom in a little more on EOS now she had her touch of this key level
- Daily EOS / USD
Ok, last one.. NEO / USD
- NEO / USD Monthly
- NEO / USD D3
Here as well.. A Range low reclaim around a key level.
Last, but not least I want to point out the relation between Altcoins & Bitcoin.
I'm keeping this short. As most of you already know, Altcoins aren't usually performing well when Bitcoin is volatile and it doesn't matter what direction Bitcoin the volatility. Altcoins usually showing strenght whenever Bitcoin is ranging.
What we've seen from Bitcoin & Altcoins in the last weeks is telling me that there's a huge lack of supply for Altcoins.
Bitcoin just made a 100% move upwards from the local bottom and it didn't hurt Altcoins as it you would have expected.
You can see this very clear as well, again on the Bitcoin dominance chart which would have spiked up in the last years with such a move from Bitcoin but instead it kept ranging and even broke down recently.
Planning and timing of our entries.
For the timing of the entries I want to zoom in a little on the Bitcoin Dominance chart, have a small talk about Bitcoin & take a look at Tezos as Altcoin example.
Let's start with Bitcoin
Bitcoin is up 100% from the lows and did that in a pretty steady grind up without major pullbacks. At the moment she's sitting close to some major key resistance levels. In my opinion the change from shifting towards a more Altcoin friendly price action from Bitcoin's side after a 100% run into a key resistance zone isn't gonna happen without some extreme volatility. I'm not going to talk about what I'm leaning to for Bitcoin because it doesn't matter.
The thing that matters is that in my opinion it's not gonna slow down here and just chill for weeks after such a rally into a key resistance zone.
This is the reason even though Bitcoin Dominance broke down & a lot of Altcoins started lower time frame bullish market structure I'm not entering multiple Altcoin set ups yet as I do think there's time and we will get some good Altcoin pullbacks.
So let's move on to the Bitcoin Dominance part
My charts will explain the most of my thought process.
XTZ || BTC (MID ALT EXAMPLE) Chart:
Pink box on the Dominance chart & XTZ chart
Bitcoin Dominance broke down from the long consolidation above our key level and closed back below / inside the higher time frame Range.
In the weeks after the breakdown she trended up on the lower time frame until she reached our major key level which is resistance now again. At the same time a lot of Altcoins which were around interesting support levels & range lows trended down slowly. Not reacting majorly towards pretty big Bitcoin moves, which normally would have make them pullback hard. This is in my opinion already a sign of the lack of supply on Altcoins & indicating strenght + weakness on the dominance chart.
Green box on the Dominance chart & XTZ chart
In the green box on the Dominance chart you can see the moment Dominance broke down from the lower time frame uptrend after bearish retesting our key resistance level.
In the green box on the XTZ chart at the same time you can see the moment they broke out on the lower time frames
So... What do we have?
- Expecting Bitcoin to make a big move soon
- Bitcoin dominance broke down bearish on the HTF against a key resistance level
- Bitcoin dominance retested our key level and broke the lower time frame uptrend
- A lot of strong looking Altcoins around major key levels
Timing, Entries & invalidation bullish Altcoin idea as close as possible
To time my entries well on Altcoins I'm looking for these Altcoins to break down their lower time frame uptrends back into their higher time frame key support levels.
At the same moment you'll see a move up from Bitcoin dominance retesting the higher time frame origin of the recent breakdown / into our key resistance level. Buying this retest will give you a very clear & close invalidation level for Altcoin exposure in general. You don't want to see Bitcoin dominance back above the key level with a higher time frame close. This will invalidate the bullish argument for Altcoins. I expect this to happen at the moment Bitcoin starts her volatility soon.
What does this approach bring me
- My entries on the Altcoin key support levels will be as close as possible to their higher time frame invalidations
- The way I start to allocate a bigger percentage of my portfolio into Altcoins based on this Dominance key resistance level will give me a tight invalidation level for this idea and I can get out of my heavier Altcoin allocation pretty quick. *
* This could always happen and instantly invalidate my bullish argument for the time being.
The risk will be Bitcoin. Altcoins wouldn't like her to go for new lows.
- Leaning towards a good Altcoin cycle soon
- There's zero need to jump in on this lower time frame strenght on Altcoins right now because Bitcoin is not done and in my opinion there will be a good throwback first
- We will be watching the higher time frame demand zones on Altcoins to pick them up or look for a good reaction first to step in