If you follow the cryptocurrency market, then you know that bitcoin has taken off, rising a little over 50% in 18 days, when measured from the last swing low of $4,963 to last week's high of $7,581.82. When calculated from the December bear market bottom of around $3,128.89 (exact price varies relative to data source), the digital currency was up as much as 149%.
Bitcoin is now clearly above its 200-day simple moving average (SMA) and long-term downtrend line, which were exceeded over the past couple of months. These are signs of a bullish reversal, which significantly improves the outlook for the intermediate time frame. Recent price action also bodes well for the wider cryptocurrency market, especially the more actively traded alternative coins.
Short-term weakness can be used to accumulate positions in anticipation of further market-wide strengthening. Coins showing relative strength, such as bitcoin, generally have a better chance of outperforming the wider market. The relationship of price to the 200-day SMA is one way to see relative strength.
The following cryptocurrencies are above their 200-day SMA and long-term downtrend line:
- Bitcoin cash (BCH/USD)
- Dash (DASH/USD)
- EOS (EOS/USD)
- Ethereum (ETH/USD)
- Litecoin (LTC/USD)
- Monero (XMR/USD)
Let's look at the charts for a few of these coins.
The first is bitcoin cash. It has been progressing nicely and is still at the early part of its bullish reversal based on price behavior. The cryptocurrency was up as much as 425% from the $73.6 December bottom as of last week's high of $387. The long-term downtrend line and 200-day SMA were exceeded to the upside at the beginning of April. That strength was quickly followed by a decline in volatility and the formation of a descending consolidation channel that formed at support of the line and SMA.
That channel creates a bullish flag trend continuation pattern. Last week, a breakout of the flag occurred. This is classic bullish behavior for a strengthening trend.
Next is ethereum. From its $80.56 December low, ethereum has risen as much as 156.8% as of last week's $206.87 high. It broke above its 200-day SMA at the beginning of April, then quickly consolidated above that line, subsequently forming a bullish flag pattern. Price broke out of the pattern last week.
Finally, let's look at litecoin. Its chart shows greater strength than bitcoin cash, as it has already gotten well above the downtrend line and 200-day SMA. Litecoin has been a market leader as it broke above its 200-day SMA early, in mid-February, and kept going, rising as much as 347% as of the $99.50 high reached seven weeks ago. At the beginning of May, it broke out of a bullish wedge pattern and continues to point higher.
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