The decline in US stock markets last week extended the series of market-wide losses to three consecutive weeks. The Nasdaq Composite has fallen for six consecutive days for the first time since 2019. The negative reaction of the markets to the seemingly positive August jobs report indicates that traders are concerned about the Federal Reserve’s future steps and their effects on the economy.
Weakness in US stock markets pulled Bitcoin (BTC) below $20,000 on September 2, and bears kept the price below the level over the weekend. This reduced Bitcoin’s market dominance to just under 39% on September 4, the lowest level since June 2018, according to data from CoinMarketCap.
Although sentiment remains negative and a bottom is hard to reach, investors who believe in the long-term prospects of the cryptocurrency may take the opportunity to gradually build positions at lower levels instead of trying to catch the bottom. However, investors can avoid chasing higher prices during bear market rallies and look to buy when the price drops to strong support levels.
If Bitcoin makes a redemption, specific altcoins may move higher. Let’s examine the charts of the top 5 digital currencies that look strong on the charts.
BTC / USDT
Bitcoin has been trading in a tight range between $19,520 and $20,576 over the past few days which indicates that there is a balance between buyers and sellers in the near term. Although the bulls are buying on dips, they have failed to beat the selling on higher levels.
The 20-day sloping exponential moving average ($20,863) and the Relative Strength Index (RSI) in negative territory indicate an advantage for sellers. If the bears drop below $19,520, the BTC/USDT pair could drop to the strong support zone between $18,910 and $18,626.
This area is likely to attract strong buying by the bulls as it was on two previous occasions. The bears will have to plunge the price below $17,622 to signal a resumption of the downtrend.
On the other hand, buyers will have to push the price and hold it above the 20-day moving average to indicate that the bears may lose their grip. The pair could then rise to the 50-day simple moving average ($22,271).
The price bounced off the strong support near $19520 but the bears are trying to halt the recovery at the moving averages. This indicates that the bears are selling every slight spike. If the bears cut the price below $19,520, the pair may resume the next phase of the downtrend.
Contrary to this assumption, if the bulls push the price above the moving averages, the pair can attempt to rise to the range resistance at $20,576. Buyers will have to cross this hurdle to signal a possible trend change in the near term.
ADA / USDT
Cardano (ADA) is consolidating but trying to rise above the moving averages. This indicates demand at lower levels and increases the chances of a rally, which is why it was chosen.
The 20-day moving average has flattened ($0.47) and the RSI has jumped into positive territory, indicating that selling pressure is easing. If the buyers maintain the price above the 50-day SMA ($0.50), the ADA/USDT pair may rise to the downtrend line.
This level could once again act as a strong resistance but if the bulls overcome this barrier, the pair could rise to $0.70.
This positive short-term outlook can be nullified if the price drops below the current level and falls below the 20 day moving average. If that happens, the pair may slip back to the strong support level at $0.40.
The 20 moving average on the 4-hour chart is sloping upwards and the RSI has risen into the overbought territory. This indicates that the bulls are in the lead but a minor correction or consolidation is possible in the near term.
If buyers maintain the price above $0.48 or the 20-EMA, it will signal a change in sentiment from selling on rallies to buying on dips. This could push the price to $0.54 and later to the downtrend line.
To negate this positive opinion, the bears will have to pull the price below $0.48. If that happens, the pair could drop to $0.44 and then to $0.42.
ATOM / USDT
Cosmos (ATOM) has not given up its steam in the past few days and is trading near the general resistance at $13.45. This indicates that traders are not closing their positions because they expect the price to rise. This is why it is included in this list.
ATOM/USDT fell below the 50-day simple moving average ($11.08) on August 29, but the bulls bought at lower levels. That started the rebound that reached the resistance level at $13.45. Gradually bullish moving averages and the RSI in positive territory indicate that the path of least resistance is to the upside.
If the buyers push the price above $13.45, the pair could gain momentum and rise to $15.30 and then to $20. This positive outlook could be negated if the price drops sharply and breaks below the psychological support at $10.
The 20-EMA is sloping and the bulls are buying on dips to this support. This indicates a positive feeling in the short term. The bulls will try to push the price to the general resistance at $13.45. This is an important level to watch because a breakout and a close above it may indicate a resumption of the upward movement.
Conversely, if the price drops from the current level or upper resistance and breaks below the 20-EMA, this will indicate that the bears are active at higher levels. After that, the pair may stay in a range between $10 and $13.45 for some time.
Related: Increase or cleanse? Why the merger may not provide the price of Ethereum from ‘Septembear’
FIL / USDT
Filecoin (FIL) traded in a narrow range between August 27 and September 2, which turned to the upside on September 3. The expectation of buyers to continue their purchases led to the choice of this currency.
The FIL/USDT pair rose sharply and broke above the 20-day EMA ($6.39) on September 3. This is the first indication that buyers are trying to return. However, the bears are unlikely to give in easily as they pose a strong challenge near the 50-day simple moving average ($6.92).
Bears pulled the price below the 20-day moving average on September 4. If they keep the price below this level, the pair could drop to $5.50. Conversely, if the price rises from the current level and breaks above the 50-day SMA, it will indicate strong buying on dips. The pair can then rise to $9 and later to $9.50.
The pair fell from the upper resistance zone between $6.80 and $6.60 but the small positive is that the bulls did not allow the price to slide below the 20-EMA. If the price bounces off the current level, the probability of a breakout and closing above the area increases.
If this happens, the pair will complete an inverse head and shoulders pattern. The pair could then pick up the momentum and rally towards the pattern target at $7.6 and later to $8.30.
This positive opinion may be invalidated in the near term if the price breaks and closes below the 20-EMA. The pair could then decline to the strong support level at $5.50.
EOS / USDT
EOS made it to the list because even in the chaos, it managed to stay above the moving averages. This indicates an outperformance in the short term and increases the potential for a rally if sentiment in the crypto sector improves.
The EOS/USDT pair completed the round bottom pattern on August 21 but the bulls were unable to sustain the higher levels. Bears pulled the price below the breakout level on August 28, indicating a strong sell-off on the rallies.
The small positive is that buyers bought the dip to the 50-day simple moving average ($1.33). The 20-day moving average ($1.48) and the Relative Strength Index (RSI) flattened near their midpoint, indicating a balance between buyers and sellers.
This balance could tilt in favor of the bulls if they push the price and it continues above $1.60. The pair could then rise to the general resistance near $2. Alternatively, a breakout and a close below the 50-day SMA could open the door to a possible drop to $1.15.
The bears have sold off the bounce near $1.60 and are trying to pull the price below the $1.46 breakout level. If they do so, the pair may revert back to the uptrend line. This level has acted as strong support on three previous occasions, so the bulls will try to defend it again.
If the price bounces off the rising trend line and breaks above $1.60, the pair could gain momentum and rise to $1.80 and later to $2. Conversely, a breakout and a close below the uptrend line will indicate that the short-term bullish move may be over. The pair could then fall to $1.24.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risks, you should do your own research when making a decision.