• Francisco Hernandez

Monero (XMR) Bottomed on New Years Eve 2019?

XMR-USD, 1D, BTSE


Overview

Monero (XMR) has dropped about 91.08% since its all-time-high of $495.84 to $44.22 on December 31st, 2019. That's right, XMR was $44.22 a coin on New years Eve. Could this have been the bottom? In this article, I use Fibonacci retracements and extensions to identify support and resistance levels (Gaucan, 2011). I also utilize Bollinger Bands and other complementary indicators, such as On Balance Volume (OBV), Chaikin Money Flow (CMF), and the MACD (Bollinger, 1992).

Fibonacci Retracements and Extensions

I calculated the Fibonacci retracements and extensions using the low of $44.22 on December 31st, 2019 and the recent high of $69.14 (yesterday). I plotted these as white horizontal lines along with their respective labels in the chart above. Typically, Fibonacci retracements occur at three levels: 38.2%, 50%, and 61.8% (Gaucan, 2011). For a 38.2% retracement from yesterday's high we get support level of $59.62. If this level doesn't hold, then the next price level we expect support at is $56.68 and, following that, $53.74 (i.e., 50% and 61.8% retracement, respectively). Also, notice that the 20-day moving average (MA; red; aka middle BB) has passed the 50-day MA (orange). This is a healthy sign because both the 20-day and the 50-day MAs can act as support. Coincidentally, the MAs are hovering around the 61.8% retracement support level. As for resistance levels, we have yesterday's high of $69.14 (i.e., 0% retracement) and the following Fibonacci extension level of $78.66 (38.2% extension). The upper BB will also act as resistance. Should support hold we could retest yesterday's high (i.e., $69.14) or perhaps higher resistance levels.


Bollinger Bands and Other Indicators

According to Bollinger (1992), Bollinger Bands (BB) are paired well with the MACD, OBV, and CMF because they avoid too much collinearity (i.e., redundant indicators, such as the RSI with MACD). Let's start with the BBs. We saw prices break and close past the upper BB (blue) last week and yesterday. Today we see a slight pull back with a Doji shaped candle. This suggests that the market is currently neutral. OBV is pointing down after yesterday's high. This makes sense given a neutral market; there won't be to much buying or selling, hence the Doji. Lastly, the CMF and MACD are divergent (i.e., pointing up) with the OBV and price, a good bullish indication.


Conclusion

The current price is hovering above the 38.2% retracement support level of $59.62 (i.e., technically the price is over the 23.6% level but 38.2% is the standard) showing support is holding. The 20-day MA has passed the 50-day MA, a good sign and an opportunity for support. The CMF and MACD are both showing a positive divergence with the OBV and price. Taken together, these are bullish signals. I am short-to-mid term bullish on XMR. To be very bullish, I want to see the OBV pointing upward along with the CMF and MACD. I also would like to see the price close at or above the upper BB and/or the previous high of $69.14. I'll be short-term bearish if the price breaks past the 23.6% support level (i.e., $63.26). Then, I'll expect to prices to test the 38.2% (or even the 50%) retracement support levels (i.e, $59.62 and $56.68, respectively). Perhaps prices will even test support as low as the MAs (near 61.8% retracement).


Could Monero have bottomed? Perhaps. I think it is unlikely for prices to reach past the low of $44.22. Additionally, Monero is a well established privacy coin. These are good prices for a project as important as Monero. If there is a more significant downtrend in the future, it would likely happen when prices break past the 61.8% support level of $53.74. If this occurs, I would then expect price to meet the previous low or, in the worst case scenario, I'll expect a lower low of $34.70 (i.e., a 138.2% retracement). Again, however, I find this result unlikely.


References

Bollinger, J. (1992). Using Bollinger Bands. Technical Analysis of Stocks & Commodities, 10(2), 47-51.

Guacan, V. (2011). How to use Fibonacci retracement to predict forex market. Journal of Knowledge Management, Economics and Information Technology, 24-38.

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