This following analysis is provided for information and educational purposes only and should not be considered to be investment advice or recommendation.
Ben Bernanke is the latest central banker to voice his concern on bitcoin. His pretext is the same, evading regulation and government intervention. It is surprising that after creating two bubbles that burst and one that we are currently sitting on, central bankers still believe that regulation is the way ahead.
Nevertheless, the unregulated WikiLeaks founder Julian Assange tweeted that his organization made a staggering 50,000% return on investments in bitcoin.
Though it is difficult for us to match the returns generated by WikiLeaks, let’s try to at least make a beginning.
Traders who had purchased bitcoin at $4150 on our earlier recommendation are sitting on about 36% gains within a few days. We suggest traders to sell another 25% of their positions at the current levels and hold only 25% with a stop loss of $5400.
But why not sell the complete position at the present levels?
Bitcoin has risen vertically from about $4816.31 to $5883.63 in four days. Since then, the cryptocurrency has traded in a small range of $5444.75 to $5883.63, forming a pennant, which is a bullish set up.
If bitcoin can breakout to new highs above $6000, it can rally to $6512 and thereafter to $7193. The target objective is a good 15% and 26% higher than the current levels.
On the other hand, if bitcoin corrects, it can fall to $5470.97, which is the 23.6% Fibonacci retracement of the rally from $4135.09 to $5883.63. Below this, a fall to $5215.69 is also possible.
Our stop loss is just below the support at $5470. If the digital currency falls and hits our stop loss, it will result in a loss of 4.7% in profits from the current levels. In order to gain a possible 15% return, we are risking 4.7% of immediate gains, which is a good risk to reward ratio of 1:3. Hence, we believe that traders should keep some position to ride the next leg up, if it materializes.
Ethereum has been swinging wildly in the past few days, making large intraday ranges in the build up to its hard fork. Now that the event is behind us, chances are that volatility will be back to normal.
In our previous analysis, we had recommended traders to go long on a breakout of $317. The first profit objective was $354.
Ethereum came within a whisker of our target, as it touched $353 on October 16. Hopefully, traders would have trailed their stops higher and would have gained from the above trade.
Presently, the digital currency is retracing the breakout levels of $315. It also has a trendline support at the same level. Therefore, $315 is likely to act as a strong support. We expect ethereum to again bounce from the $315 levels. Therefore, traders can initiate long positions on a rebound from $315 and keep a stop loss of $295, which is below both the moving averages and below the low of the breakout bar on October 11. The first target objective remains $354.
The cryptocurrency will become negative once it falls and sustains below $295.
We had suggested a trade in litecoin on a breakout above $58. This also turned into a profit, as it came within a whisker of our target objective of $71. The digital currency reached a high of $70.466 on October 15.
Since then, litecoin has been in a correction.
The cryptocurrency has a strong support between $57 to $59 levels from both the critical moving averages and the previous resistance of the range, which will now act as a support.
If the cryptocurrency bounces off this level, it is likely to again gain momentum and resume its uptrend. However, traders should wait for a confirmation of a resumption of the uptrend before entering long positions, as litecoin has been weak during the pullback. It has not even crossed above the 50% Fibonacci retracement levels of the falls from $93.649 to $32.681 in September.
* All the market data is provided by the HitBTC exchange.