XRP Prices: Patience Is Warranted
2017 was a great year for investors, where the market environment was characterized by a constant barrage of new all-time highs, low volatility, and a number of high-flying sectors taking center stage. 2018 is turning out to be a whole different beast; a market correction has currently gripped the markets and all the high-flying sectors that led the market late last year are currently correcting.
Cryptocurrencies were by far the best-performing asset class last year, and it shouldn’t be too shocking that they are the worst-performing asset class this year. For example, Ripple staged an epic advance in 2017, tacking on an incredible 3,216.67% move on the year. This exceptional level of performance quickly changed its tune in 2018, and XRP prices are currently down 67.53% on the year. This painful performance number does not even factor in the peak that was created earlier this year, otherwise, the performance number would look even more dreadful.
Even though the performance has been dismal, there is a lot to be excited about, because a number of developments have occurred that are reinforcing the notion that Ripple is going to be around for quite some time. Ripple has attained a number of partnerships and is looking to make more, making it a viable and efficient payment processing option. Already working with Banco Santander, S.A. (NYSE:SAN) to facilitate international payments, Ripple could possibly look for new partners in Amazon.com, Inc. (NASDAQ:AMZN) and Starbucks Corporation (NASDAQ:SBUX), according to market speculation.
These fundamental factors are great, but when it comes to generating an XRP price forecast or determining whether or not a Ripple price rally is set to ensue, these factors do little much in that respect.
In order to determine whether or not Ripple has bottomed and is set to rally, I will need to take a close look at the price action and see if the necessary signals have been generated that would suggest that a bottom has been put in and a rally is likely to ensue.
The following XRP price chart has been annotated in order to highlight the indications I am currently watching.
Chart courtesy of TradingView.com
This price chart illustrates that the Ripple price rally was created by a bullish wave structure consisting of impulse waves and consolidation waves.
The impulse waves are highlighted in green and they capture the stage in a bullish trend when a cryptocurrency sustains a move toward higher prices.
The consolidation waves are highlighted in purple and they capture the stage in a bullish trend when a cryptocurrency corrects and refrains from advancing. This corrective price action is a necessary part of every bullish trend because it creates the required foundation so a new advancing impulse wave can follow.
These waves feed off each other in an alternating wave structure in order to create and sustain a trend.
These waves coincide with the signals generated by the moving average convergence/divergence (MACD) indicator located in the lower panel. The current bearish signal supports the notion that a consolidation wave is currently in development.
MACD is an influential trend-following momentum indicator that uses the crossing of a signal line in order to distinguish whether bullish or bearish momentum is influencing the price action in a cryptocurrency. Bullish momentum implies that a cryptocurrency is geared toward higher prices, while bearish momentum implies that a cryptocurrency is geared toward lower prices.
Momentum is a very powerful force because a cryptocurrency cannot sustain a move in either direction unless the applicable momentum is supporting the move.
The MACD signal lines are currently in bearish alignment, supporting the notion that a consolidation wave is in development, which implies that a correction is still running its course.
In order to negate the repercussions suggested by the bearish MACD cross, a bullish MACD cross is needed. When one is generated, it will imply that Ripple prices are geared toward higher prices and a new advance via an impulse wave will follow.
As long as the MACD indicator remains in bearish alignment, the path of least resistance will be geared toward lower prices and I will be eyeing the level of price support highlighted on the following Ripple price chart.
Chart courtesy of TradingView.com
This XRP price chart illustrates that the level of price support I am eyeing was a previous level of price resistance that defined the previous consolidation wave.
The reason why I am eyeing this level is that it is very common for price to return to the previous level of price resistance and test it from above. This price action is called a backtest and it serves to reinforce that the original break above resistance was legitimate, while simultaneously establishing this level as a new significant level of price support.
Support currently resides around $0.25. A successful backtest acts like a springboard, so once this level is tested and it holds, a trend reversal usually follows. I believe that if such an event does occur, it will mark the bottom in this current correction, and the appropriate signals will follow, suggesting that Ripple prices are set to appreciate once again.
I believe that the correction in Ripple prices is still running its course. Only when the appropriate signals are generated will I believe that a bottom has formed and that higher XRP prices are likely to prevail.
Check out the original article here.
Author: Patrick Brik CFA, BAS