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Technical Analysis of the Crypto Currency Market

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Crypto currencies are a new asset class and appear to have qualities that are like standard currency pair exchange rates.  Historical price action can be evaluated using technical analysis for crypto trading to determine the future direction of the crypto currency pair. Using support and resistance along with momentum and divergence, you can evaluate the historical movements of a crypto currency.  Here are some examples

LTC/EUR Daily Chart Technical Analysis

The price of the Litecoin can be measured against standard currencies such as the Euro and the dollar as well as other crypto currencies.  The key is to look across all of these pairs and find pairs that are on the move.

You can see that support on the LTC/EUR pair is the 50-day moving average near 152. A break of this support level could lead to a test of the February lows near 80.  Resistance is seen near the 100-day moving average at 172.

Negative Momentum on LTC/EUR is Accelerating

Prices are sliding, and momentum could play a role in determining whether the exchange rate can remain above support levels. Momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in the red with a downward sloping trajectory which points to lower prices. There is a caveat which is that the exchange rate has moved too far to fast according to the fast stochastic. The fast stochastic is now printing in oversold territory below the oversold trigger level at 19, which could foreshadow a correction. Historical volatility is at subdued levels as reflected by the Bollinger band width. The lower the level of the Bollinger band width the lower the historical volatility.

Bitcoin is the most liquid of the cryptocurrencies with most of the liquidity coming from the BTC/USD and BTC/EUR.  Bitcoin also has decent liquidity versus Litcoin, Ethereum and Ripple.  Bitcoin prices seem to be forming a double top.  The second top is solidified, and prices will need to push above the double top at 11,642. There is additional resistance seen near the 100-day moving average at 12,437. Support is seen near the 50-day moving average at 10.154.

Positive Momentum is Decelerating, and Volatility is Subdued

Positive momentum is decelerating as the MACD (moving average convergence divergence) histogram prints in the black with a downward sloping trajectory which points to consolidation. The fast stochastic generated a crossover sell signal, in overbought territory which points to downward price action. The recent sideways price action has pushed the Bollinger band width to the lowest levels seen since November. The Bollinger band width subtracts the Bollinger band low from the Bollinger band high and measures historical volatility. The lower the level of the Bollinger band width the lower the historical volatility. Generally, energy is building during periods when volatility is low, and explodes higher with a breakout or break down in prices.

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