Bitcoin (BTC) and the cryptocurrency market in general are taking a breather following the May 31 rally. Meanwhile, most altcoins remain severely oversold, with most 70% to 90% below their all-time highs.
What is clear is that fear is everywhere and blood is in the water. Risk markets around the world are suffering, but it is precisely these kinds of conditions that create opportunities where professional money accumulates and adds positions.
Let’s take a look at three altcoins that might be poised for a rebound if the broader market enters a new uptrend.
ADA might be preparing for an 80% hike
Cardano (ADA) has a significantly bullish update coming soon. The long-awaited Vasil hard fork, which increases performance and adds more Plutus enhancements, is scheduled for June.
From a price action point of view, ADA is positioned in a strong price range that is likely to support any further upside the broader market experiences. Within the Ichimoku Kinko Hyo system, ADA has held a significant gap between the bodies of the last three weekly candlesticks and the Tenkan-Sen.
When the candlestick bodies and the Tenkan-Sen have noticeable gaps, a correction usually occurs in three to four days. This is because the balance is out of sync, the Tenkan-Sen and price action like to stick together as much as possible. A mean reversion towards the Tenkan-sen is very likely when one moves too far from the other.
However, if the broader cryptocurrency market experiences a large rebound, the price of ADA it can be fired past the Tenkan-Sen to test the Kijun-Sen. ADA has not tested the weekly Kijun-Sen since the week of November 8, 2021.
The weekly Kijun-Sen is at $1.02 and contains the 2021 volume checkpoint and the 50% Fibonacci retracement from the all-time high to the low of Jan 25, 2021.
GWeekly chart of the ADA/USD pair (Binance). Source: TradingViewMATIC apunta a USD 1
Looking at Polygon’s weekly chart (MATIC), one can’t help but notice that it looks strikingly similar to ADA. Both MATIC and ADA have been selling from $3 and both are stuck in the $0.50-$0.60 price range, but that is where the similarities end.
Fundamentally, MATIC remains strong. Governments around the world have attempted to restrict or ban mining due to the excessive energy costs of proof-of-work blockchains, and MATIC is likely to avoid government scrutiny and attract supporters as a positive example of environmental stewardship.
Like ADA, MATIC has significant gaps between its weekly candlestick bodies and the Tenkan-Sen. Although, the MATIC gaps are more significant. Likewise, the gap between the price and the Kijun-Sen is much more significant.
Within the Ichimoku Kinko Hyo system, there is a maximum mean price will travel away from the Kijun-Sen before experiencing a violent mean reversion. For MATIC, that threshold is 63%.
Any renewed bullish momentum in for Bitcoin will likely see MATIC lead the altcoins higher until it reaches the $1.00 to $1.15 value area near the weekly Tenkan-Sen.
XLM lags behind the altcoin market, but is known for surprises
Sometimes it’s hard to forget that during the last big bull run, from the COVID crash to November 2021, there were some altcoins important ones that did not reach new all-time highs. Stellar (XLM) is one of them. In fact, the last time XLM made a new all-time high was the week of January 8, 2018, almost four and a half years ago!
One thing that XLM has going for it that not many other weekly charts have is a very clear falling wedge pattern. Outside of the standard rectangle and triangle patterns in technical analysis, the wedge patterns are the most powerful. What makes its wedge so powerful is the likely false breakout to the downside.
The most likely direction for a falling wedge is higher – but breaks below a falling wedge can produce powerful selling opportunities. The typical behavior that analysts and traders expect to see with a failed falling wedge is immediate and quick selling, but so far, the bears have been unable or unwilling to do so.
Instead, XLM’s weekly chart shows a strong probability of a false breakout. If the bullish momentum returns to the cryptocurrency market, XLM is likely to reach the second peak of the falling wedge near the $0.38 value zone.
Classical technical analysts believe that the technicals lead the fundamentals. If that is true, then altcoins like XLM, MATIC, and ADA might be poised in very desirable conditions in the event of any new bull run.
However, downside risks remain a concern but are likely to be extremely limited. If a new uptrend does not materialize before the end of June, the cryptocurrency market will likely remain flat until a major breakout to the upside or downside in the fall.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should do your own research when making a decision..
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