Last week’s decline in US stock markets extended the market-wide losing streak to three consecutive weeks. The Nasdaq Composite fell six straight days for the first time since 2019. Markets’ negative reaction to what appeared to be a positive August jobs report suggests traders are nervous about future moves by the Federal Reserve and their impact on the economy.
Weakness in US stock markets pulled Bitcoin (BTC) back below $20,000 on Sept. 2 and bears kept the price below the level over the weekend. This brought Bitcoin’s market dominance to just under 39% on Sept. 4, its lowest level since June 2018, according to data from CoinMarketCap.
Daily crypto market data view. Source: Coin360
Although sentiment remains negative and it is difficult to call a bottom, investors who believe in the long-term prospects of cryptocurrencies could take the opportunity to gradually build positions at lower levels rather than trying to reach the bottom. However, investors might avoid chasing higher prices during bear market rallies and look to buy when the price falls to strong support levels.
If Bitcoin rallies, select altcoins could surge higher. Let’s study the charts of the top 5 cryptocurrencies that look strong on the charts.
BTC/USDT
Bitcoin has been trading in a tight range between $19,520 and $20,576 for the past few days, showing an equilibrium between buyers and sellers in the short-term. Although the bulls are buying on dips, they have failed to clear the selling at higher levels.
BTC/USDT daily chart. Source: TradingView
The declining 20-day exponential moving average ($20,863) and the Relative Strength Index (RSI) in negative territory indicate an advantage for sellers. If bears sink the price below $19,520, the BTC/USDT pair could drop to the strong $18,910-$18,626 support zone.
This zone is likely to attract heavy buying from the bulls, as has been the case on two previous occasions. The bears need to sink the price below $17,622 to signal a resume in the downtrend.
On the downside, buyers need to push and hold the price above the 20-day EMA to indicate that the bears may be losing their footing. The pair could then rally to the 50-day simple moving average ($22,271).
BTC/USDT 4 hour chart. Source: TradingView
The price bounced off the strong support near $19,520 but the bears are trying to halt the rally at the moving averages. This shows that bears sell on every small rally. If the bears sink the price below $19,520, the pair could resume the next leg of the downtrend.
Contrary to this assumption, the pair could attempt a rally to range resistance at $20,576 if bulls propel the price above the moving averages. Buyers need to clear this hurdle to signal a possible trend reversal in the near term.
ADA/USDT
Cardano (ADA) is in a consolidation but it is attempting to scale above the moving averages. This indicates demand at lower levels and increases the chances of an upward move, which is the reason for his selection.
ADA/USDT daily chart. Source: TradingView
The 20-day EMA ($0.47) has flattened out and the RSI has jumped into positive territory, indicating that selling pressure is easing. If buyers sustain the price above the 50-day SMA ($0.50), the ADA/USDT pair could rally to the downtrend line.
This level could act as a strong resistance again, but if bulls clear this barrier, the pair could rally to $0.70.
This positive view could be invalidated in the short-term if the price turns down from the current levels and breaks below the 20-day EMA. In that case, the pair could revisit the strong support at $0.40.
ADA/USDT 4 hour chart. Source: TradingView
The 4-hour chart’s 20-EMA is sloping up and the RSI has risen into overbought territory. This suggests that the bulls are in command but a minor correction or consolidation is possible in the near term.
If buyers sustain the price above $0.48 or the 20-EMA, it will indicate a switch in sentiment from selling on rallies to buying on dips. That could push the price to $0.54 and later to the downtrend line.
To invalidate this bullish view, bears need to sink the price below $0.48. In that case, the pair could drop to $0.44 and then $0.42.
ATOM/USDT
Cosmos (ATOM) has remained unchanged for the past few days and is trading near its overhead resistance at $13.45. This indicates that traders are not closing their positions as they expect the price to move higher. This is the reason for inclusion in this list.
ATOM/USDT daily chart. Source: TradingView
The ATOM/USDT pair broke below the 50-day SMA ($11.08) on Aug. 29, but the bulls were buying at lower levels. That triggered a rally that hit the overhead resistance at $13.45. The gradually rising moving averages and the RSI in the positive territory indicate that the path of least resistance is up.
If buyers push the price above $13.45, the pair could gain momentum and rally to $15.30 and then $20. This bullish view could be invalidated if the price turns sharply lower and breaks below the psychological support at $10.
ATOM/USDT 4 hour chart. Source: TradingView
The 20-EMA is sloping up and the bulls are buying the dips to this support. This points to a positive mood in the short term. The bulls will attempt to push the price down to the overhead resistance at $13.45. This is an important level to watch as a break and close above it could signal the resumption of upward movement.
Conversely, if the price turns down from the current levels or the overhead resistance and falls below the 20-EMA, it will indicate that bears are active at higher levels. The pair could then remain in a range between $10 and $13.45 for some time.
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FILE/USDT
Filecoin (FIL) traded in a tight range between August 27th and September 2nd, moving higher on September 3rd. The expectation that buyers would be able to continue their purchases led to the selection of this coin.
FIL/USDT daily chart. Source: TradingView
The FIL/USDT pair surged and broke the 20-day EMA ($6.39) on Sep 3. This is the first indication that buyers are attempting a comeback. However, the bears are unlikely to give up easily and they are posing a strong challenge near the 50-day SMA ($6.92).
The bears pulled the price back below the 20-day EMA on September 4th. If they sustain the price below this level, the pair could drop to $5.50. Conversely, if the price surges up from the current level and breaks out above the 50-day SMA, it will indicate heavy buying on the dips. The pair could then rally to $9 and $9.50 thereafter.
FIL/USDT 4 hour chart. Source: TradingView
The pair turned down from the overhead resistance zone of between $6.80 and $6.60, but a minor plus is that the bulls have not allowed the price to slide below the 20-EMA. If the price bounces off the current level, the possibility of a breakout and a close above the zone increases.
In this case, the pair will complete an inverted head and shoulders pattern. The pair could then gain momentum and move higher towards the pattern target of $7.6 and later to $8.30.
This bullish view could be invalidated in the short-term if the price breaks out and closes below the 20-EMA. The pair could then drop to the strong support at $5.50.
EOS/USDT
EOS made the list because even in the chaos it managed to stay above the moving averages. This points to near-term outperformance and increases the likelihood of a rally if sentiment in the cryptocurrency sector improves.
EOS/USDT daily chart. Source: TradingView
The EOS/USDT pair completed a rounding bottom pattern on August 21, but the bulls failed to sustain the higher levels. The bears pulled the price back below the breakout level on August 28, indicating strong selling on rallies.
On a small plus, buyers aggressively bought the dip to the 50-day SMA ($1.33). The 20-day EMA ($1.48) has flattened out and the RSI is near the midpoint, indicating an equilibrium between buyers and sellers.
This equilibrium could tip in the bulls’ favor if they push and sustain the price above $1.60. The pair could then rally to overhead resistance near $2. Alternatively, a break and close below the 50-day SMA could open the doors for a potential drop to $1.15.
EOS/USDT 4 hour chart. Source: TradingView
The bears sold the bounce near $1.60 and are attempting to pull the price back below the $1.46 breakout level. If they do, the pair could drop to the uptrend line. This level has served as strong support on three previous occasions, hence the bulls will once again attempt to defend it.
If the price recovers from the uptrend line and breaks above $1.60, the pair could gain momentum and move up to $1.80 and later to $2. Conversely, a break and close below the uptrend line suggests that the short-term upside may be over. The pair could then drop to $1.24.
The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk, you should do your own research when making a decision.
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