A practicing trader and founder of the Crypto Mentors project, Nikita Semov, explains the current market situation.
Bar Analysis
The bar from last week showed a rise from the buying zone. However, at the time of writing, buyer initiative was not strong enough to sustain the upmove. We analyse the reasons for the down bar at the close of the current week.
The bar’s spread is tight. It is the narrowest buying spread in months, which does not bode well for the bulls. Volume is similarly small compared with a number of previous bars. Progress in the wave has slowed significantly, and although the uptick at the tail of buying is not bad, it is not enough to signal long-side strength.
The bar expected for the current week is a down bar.
In candlestick terms, a white bullish candle is engulfed by a black one, and there is no follow-through from the white. Formally one could reduce the formation to a ‘wolf’ or ‘doji’, which would indicate market uncertainty, but in practice we see buyer weakness.
Price Action + VSA
On the 4-hour time frame, the downtrend was successfully broken, which in turn gives the buyer the edge, as after clearing the trend line and the buying zone, VSA entry patterns come into play. At the time of writing they point to a long.
We have already booked part of the long position in the morning at $11 875. We continue to hold the other part, awaiting a pullback and then a resumption of the rally. A barrier will be zone $11 935-$12 267 (according to Binance). A strong zone is the clustering of the most aggressive selling and the wrong call. If we can hold above it, we will move toward $14 000.
Influence of the US market
Investor sentiment is very positive. If there is positivity in the stock market, it will also be in crypto. Fundamentally there are more factors for a fall in the S&P 500 than for a rise, but the Fed has changed the situation.
- In the Fed, they said they could allow a weaker dollar and higher inflation to support the stock market and reduce unemployment. This is a strong fundamental for S&P 500 growth. “Smart” money meanwhile flows into gold.
- The budget deficit is rising.
- The second wave of the virus is gaining momentum.
- Seasonality. August–September is characterised by a sideways or downward movement.
- There are many more retail investors on the US stock market during lockdown — Robinhood statistics confirm this.
Bitcoin has a good chance to rise together with the US stock market.
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