Bitcoin’s ongoing correction entered the next phase overnight, as the most valuable cryptocurrency got smacked lower following the rejection of the proposed ETF of the Winklevoss brothers. The sell-off was widespread, with the top altcoins also getting hit hard, and the segment quickly lost more than $10 billion in market cap, with the total value of the coins dropping below $290 billion.
The overbought momentum readings that developed in Bitcoin’s market during the recent surge are almost cleared now, but for now, there is still no sign among of strength in the rest of the market that would point to a broader rally.
That said, just looking at Bitcoin’s short-term outlook, another leg higher could be ahead, and our trend model will also likely switch to a buy signal, should the coin respect the support zone just below the current prices. Despite that, traders should remain cautious with new positions here, as most of the major altcoins are still on sell signals, and a segment-wide trend change is far from being confirmed.
BTC/USD, 4-Hour Chart Analysis
Technically speaking, BTC’s short-term setup hasn’t deteriorated much after the overnight plunge, with the $7650-$7800 support zone holding up the coin, even as the steep declining trendline has been broken. The MACD indicator suggests that the correction will likely continue, with a possible test of the lower boundary of the support zone or even the $7350 level.
The short-term trend signal is still neutral, and traders shouldn’t enter new positions yet, with further support found at $7000 and resistance ahead at $8400 and $8700.
Altcoins Bearish but Stable amid BTC’s Correction
ETH/USD, 4-Hour Chart Analysis
ETH also remained in a very similar technical position despite the selloff, with the coin still trading in the short-term $450-$500 range that developed after last week’s failed break-out move. ETH is now close to the weak rising trendline that supported the price since the end of June, and a move below that could trigger a test of the support zone between $400 $420, as the broader bearish trend is still intact.
With that in mind, traders shouldn’t enter new positions, and our trend model remains on a sell signal with regards to Ethereum. Primary resistance is just ahead at $475, with further zones near $500 and between $555 and $575, while primary support is found at $450.
LTC/USD, 4-Hour Chart Analysis
The other major altcoins are also in bearish setups, and we still expect at least a test of the lows following the recent failed moves, and given the relative weakness that altcoins showed during BTC’s surge. Litecoin, which has been leading the way lower in the past months drifted out of the weak rising trend that developed since the previous test of the $75 level, and should the coin move below $80, another wave lower would likely begin.
XRP/USD, 4-Hour Chart Analysis
The third largest coin Ripple is also weak technically, and although the coin is still trading in a narrow range near $0.45, the structurally crucial support zone near $0.42 is dangerously close. Bulls would need a move above at least $0.49 to have a chance of a quick trend change, but for now, traders should avoid new positions in XRP.
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Disclaimer: The analyst owns cryptocurrencies. He holds investment positions in the coins, but doesn’t engage in short-term or day-trading, nor does he hold short positions on any of the coins.