The S&P 500 ended its four-week rally last week after minutes from the Federal Reserve’s July meeting hinted that central bank rate hikes would continue until inflation be under control. Fed members said there was no evidence that inflationary pressures appear to be easing.
Another drag was St. Louis Fed Chairman James Bullard’s statement that he would support a 75 basis point rate hike at the Fed’s monetary policy meeting in September. This has dampened hopes that the era of aggressive rate hikes is over.
Weakening sentiment dragged the S&P 500 down 1.29% for the week. Continuing its close correlation with the S&P 500, Bitcoin (BTC) also experienced a sharp decline on August 19 and is expected to end the week with heavy losses.
Will the bulls use the dips to build up to lower levels? If so, let’s study the charts of the top 5 cryptocurrencies that are likely to attract buyers due to their bullish setups.
BTC/USDT
Bitcoin slid below the 20-day exponential moving average ($22,864) on August 17, then below the 50-day simple moving average ($22,318) on August 19. The bulls are trying to stop the decline at the support line of the ascending channel.
The 20-day EMA has started to decline and the Relative Strength Index (RSI) is in negative territory, indicating an advantage for the bears. If the price changes direction from the moving averages, it will suggest that the bears are selling on rallies.
This could increase the possibility of a break below the channel’s support line. If that happens, the crucial $18,626-$17,622 support area could be attacked.
To avoid this situation, the bulls will have to push and hold the price above the moving averages. If they do, the BNB/USDT pair could rise towards the resistance line of the channel.
The buyers are aggressively defending the channel support line, but the downward sloping moving averages and the RSI in negative territory suggest that higher levels are likely to attract selling from the bears.
If the price declines from the current level or the 20-EMA, the probability of a break below the channel increases. If that happens, the bearish momentum could pick up and the pair could drop towards $18,626.
The first sign of strength will be a break above the 20-EMA. Such a move will indicate that the selling pressure might decrease. This could improve the outlook for a rally towards the 50-SMA.
BNB/USDT
Binance Coin (BNB) turned down the overhead resistance at $338, but the bulls managed to defend the strong support at $275. This indicates positive sentiment as bulls view dips as a buying opportunity.
The recovery may encounter resistance at the 20-day EMA ($301). If the price turns down from this level, the bears will again attempt to push the BNB/USDT pair down below $275. If this happens, it will suggest that the pair may hover in a wide range between $183 and $338 for some time.
On the contrary, if the bulls push the price above the 20-day EMA, the pair could reach $338. A break and close above this level could complete a bullish head and shoulders pattern. This could trigger a rally to $413 and then to the pattern target at $493.
The 20-EMA on the 4-hour chart has started to move higher and the RSI is near the midpoint, indicating that the selling pressure may be easing. If the price holds above the 20-EMA, the pair could reach the 50-SMA. A break and close above this resistance could increase the possibility of a rally to $338.
Conversely, if the price declines and breaks below the 20-EMA, the pair could once again fall to the critical support at $275. If this level cracks, the pair will complete a bearish head and shoulders pattern and drop towards $240.
EOS/USDT
EOS has formed the bullish inverse head and shoulders pattern. The buyers pushed the price above the overhead resistance at $1.46 on August 17, but the long wick on the daily candlestick shows strong selling at higher levels.
The bears took the price back below the breakout level of $1.46 on August 19, but the positive sign is that the buyers did not allow the EOS/USDT pair to hold below the EMA of 20 days ($1.32). This indicates that the lower levels are attracting buyers.
If the bulls hold the price above $1.46, the positive momentum could pick up and the pair could rally to $1.83. If this resistance is also scaled, the rally could extend to the pattern target of $2.11.
This positive view could be invalidated if the price declines and falls below $1.24. The pair could then decline to the 50-day SMA ($1.17).
The rally above $1.46 on August 17 pushed the RSI on the 4-hour chart to deeply overbought levels. This may have tempted short-term buyers to book profits, which pulled the price towards the strong support at $1.24. The bulls bought the dip at this level and propelled the pair back above the overhead hurdle at $1.46.
The pair could now rally to $1.56 and then to the important resistance at $1.83. Alternatively, if the price declines from the current level and breaks below the moving averages, this will suggest that the pair could stay in a range for a few days.
Related: 3 Reasons Bitcoin’s Lowest Price Isn’t Here
QNT/USDT
The series of higher highs and lower lows suggests that Quant (QNT) is in a short-term uptrend. The bulls have bought the decline from the 50-day SMA ($100) and are trying to resume the upward move.
If the price holds above the 20-day EMA ($111), this will suggest that the correction might be over. The QNT/USDT pair might first rise to $124 and then retest the important resistance at $133. If the bulls breach this hurdle, the pair could rally to the overhead resistance zone between $154 and $162.
Contrary to this assumption, if the price does not hold above the 20-day EMA, this will indicate that traders may close their positions on the rallies. The bears will need to drive the price down below $98 to gain the upper hand and signal the start of a deeper correction to $79.
The pair corrected inside a falling wedge pattern. The buyers pushed the price above the pattern’s resistance line but were unable to sustain the breakout. This suggests that the bears are active at higher levels.
If the price holds below the 50-SMA, the pair could slide towards the 20-EMA. This is an important level to monitor. If the price bounces off this level, it will suggest that the short-term trend has turned in favor of the buyers.
A breakout and close above $118 could indicate that the corrective phase may be over. Conversely, if the price slips below the 20-EMA, the pair may drop to $100.
CHF/USDT
Chiliz (CHZ) spiked to $0.23 on August 18, pushing the RSI deep into overbought territory. This may have tempted short-term traders to book profits and pulled the price back below the $0.20 breakout level.
A small bright spot is that the bulls are trying to defend the 20-day EMA ($0.17) and push the price back above $0.20. If successful, it will suggest that sentiment remains positive and traders are buying lower. This increases the probability of a retest by $0.23. If the bulls break through this hurdle, the CHZ/USDT pair could gain momentum and rally to $0.26.
Contrary to this assumption, if the price does not break above $0.20, it will suggest that the bears are selling on rallies. The bears will be back in the driver’s seat if they sink the pair below the 20-day EMA. The pair could then decline to the 50-day SMA ($0.13).
The bulls are trying to defend the uptrend line but the rally is encountering strong resistance from the moving averages. The moving averages have completed a bearish crossover on the 4-hour chart and the RSI is in negative territory, indicating a minor upside for sellers.
If the price declines and crosses below the uptrend line, the selling could intensify and the pair could drop to $0.16 and then to $0.14. Such a move will indicate that the bears are in control.
Instead, if the price breaks above the moving averages, the bulls will try to push the pair to $0.21 and later challenge the resistance at $0.23.
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 risk, you should conduct your own research when making a decision.
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