Morpheus Crypto Report – May 16, 2022
Below is the full, archived version of Morpheus Crypto Report that was sent to subscribers on April 18, 2022.
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Crypto Portfolio
(tracks and updates all crypto signals sent to members)
New crypto signals sent to members since the previous week are in yellow above.
Crypto relief rally after bouncing off major support levels
In last week’s report, we showed you that Bitcoin ($BTC) was coming into major support of its prior low from June of 2021.
As anticipated, Bitcoin indeed undercut that level around 28,800, then reversed to close the week above it:
Ethereum (($ETH) formed a similar pattern last week, as it reversed higher after nearing its June 2021 low:
The weekly charts of $BTC and $ETH above are similar, but notice that $ETH never actually touched its June low (whereas $BTC undercut its low).
This means $ETH has been showing slight relative strength to $BTC on the weekly time frame.
Just a countertrend bounce–for now
Strong markets don’t go straight up forever, nor do weak markets go straight down forever.
Right now, we are merely seeing a relief rally from short-term oversold conditions in the crypto market.
The support levels from June of 2021 gave Bitcoin and Ethereum a great excuse to bounce last week.
However, both $BTC and $ETH must now overcome a lot of overhead supply and technical resistance in order to move much higher in the near-term.
Specifically, the purple horizontal line on the charts above marks the next resistance levels to monitor if $BTC and $ETH break out above their highs of the current bounce.
For both $BTC and $ETH, it is notable that resistance is formed by convergence of prior lows and the 20-day exponential moving averages (not shown on the weekly charts).
For $BTC, watch resistance around 33,000.
For $ETH, the next significant resistance is the 2,400 area.
We are prepared to take profits and/or trail tight stops on any long positions as we near those resistance levels (we can always re-enter if the price busts through).
Where’s the volume?
Will Bitcoin and Ethereum maintain bullish momentum and eventually reclaim their 20-day EMAs?
The answer largely depends on VOLUME.
When the altcoin market reversed and began rallying last Friday, we noticed that most leading altcoins were rallying on declining volume–the opposite of what we like to see.
The current rally attempt would be more convincing IF it was backed by accumulation volume.
However, recent price and volume patterns suggest the current bounce is more the result of a temporary lull in selling pressure, rather than an abundance of new buyers.
Increasing volume is necessary on the up days in order for the bulls to regain control.
As such, we are being extra cautious with new trade entries right now—at least until we start seeing higher volume accompanying advances.
Morpheus “hit and run” trading strategy leads to a +2.3% weekly portfolio gain
The Morpheus Crypto portfolio remained 100% cash as the market sold off last week.
Then, we bought Maker ($MKR) after we noticed funds rotating into $DAI stablecoin due to the $UST/ $LUNA fiasco. By way of design, money flowing into $DAI is automatically bullish for $MKR.
After the initial spike in $MKR, we waited for a substantial pullback and then entered with an ideal, low-risk entry point.
We then scaled out the next day and quickly locked in an average gain of +44% on a ONE-day hold, as Bitcoin started reversing off its low.
The hourly chart of $MKR below shows our entry and exit points for this “hit and run” trade:
After closing $MKR, we waited for their first pullback after Friday’s rally to patiently and carefully target our next big winner.
That’s when we bought Decentraland ($MANA) due to its high relative strength and massive volume.
On the daily chart below, notice that $MANA registered its highest volume day of the year.
This was quite a contrast to most of the altcoin market, which rallied on declining volume:
$MANA immediately began moving higher after our pullback entry, and is currently showing a gain of +20% since our May 13 buy entry in your Morpheus Crypto portfolio.
We also bought $ETH on a slight pullback the next day, and is currently trading near our entry point (2,040).
Finally, we took a low-risk shot at $LUNA with a TINY position (1% of portfolio0 when it began reversing after a plan was announced to re-peg $UST back to the dollar.
The “plan” failed and $LUNA (surprisingly) went to zero.
We knew this was a risk at the time of entry, which is why we carefully limited our maximum risk to just 1% of the portfolio. Proper position sizing is a great way to control risk!
As always, we are continually scanning hundreds of charts to look for the next winning trade opportunity.
However, ideal, low risk buy setups are few and far between right now.
New crypto swing trade setups will eventually emerge If overall market price action remains solid, but Bitcoin needs more time to prove the bounce was not just a one or two-day event.
If you have been closely mirroring our entries and position sizing in the Morpheus Crypto portfolio lately, you should be quite pleased!
We kept you out of trouble by sitting in cash while the market was getting whacked.
Then, we selectively entered a few “hit and run” trade setups for quick gains on the bounces–such as your +44% gain in $MKR and +20% in $MANA (currently).
Be patient and carefully wait for the best, lowest risk setups to fall in your lap, rather than trying to force the market to generate more trade ideas with lower odds of success.
There are currently no new buy setups on our watch ist, but we will send you a trade alert with details as we enter new trades in the portfolio.
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