These are the key support levels bitcoin and ether need to hold to prevent further downside, technical analyst says
- The recent decline in
bitcoinand etheris putting key technical support levels into focus.
- Detailed below are the key levels the cryptocurrencies have to hold to prevent further downside, according to Katie Stockton of Fairlead Strategies.
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In a Monday note, technical analyst Katie Stockton of Fairlead Strategies outlined the key support levels traders should be watching for bitcoin and ether.
Bitcoin is off as much as 33% from its record high reached last month, while ether experienced a quick 29% decline since its record high set last week.
The decline in the cryptocurrencies was in part sparked by tweets from Elon Musk, who questioned the sustainability of bitcoin's energy consumption and announced that Tesla would no longer accept the cryptocurrency as a form of payment.
According to Stockton, short-term momentum in bitcoin has weakened, and key resistance for the digital coin is now set at $60,000. Meanwhile, strong support for bitcoin can be found around the $42,000 level, which was successfully tested over the weekend. That support level coincides with a fibonacci retracement level and will soon coincide with bitcoin's rising 200-day moving average.
"While this [$42,000] would be a natural place for bitcoin to hold, there are no signs of intermediate-term downside exhaustion yet," Stockton explained, adding that a breakdown below that support level "would put next support near $34,000."
A decline to $34,000 represents potential downside of 23% from current levels. Stockton believes an oversold buy signal likely won't form in bitcoin until early June, and emphasized that long-term momentum is still positive for bitcoin despite its weak intermediate-term momentum, "favoring a bullish bias beyond the corrective phase."
Ether has a different technical set up than bitcoin, as it was staging a parabolic surge in late April and May as bitcoin was moving lower.
"The magnitude of [ether's] pullback shows the risk inherent to parabolic rallies, during which support levels are left well behind," Stockton explained. Ether's support level now stands around $2,038 according to Stockton, which represents potential downside of 40% from current levels.
"We expect the pullback [in ether] to deepen in the near term, after which a consolidation phase may keep hold for a month or two within the context of the long-term uptrend," Stockton said.
As traders look to buy the dip in cryptocurrencies, keeping an eye on these key technical support levels outlined by Stockton could prove to be a helpful guide.
Read more: 'Wolf of All Streets' crypto trader Scott Melker breaks down his strategy for making money using 'HODLing' and 100X trade opportunities - and shares 5 under-the-radar tokens he thinks could explode
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