Bitcoin (CRYPTO, BTC) was hit with a 5% drop in the course of the day on Friday, going against the S&P 500 and spot gold, which both rose by over 1%.
Ethereum (CRYPTO/ETH) and Dogecoin (CRYPTO, DOGE) also experienced a descent, with Bitcoin taking the biggest hit at a 5% drop.
The fall of the three cryptos shows that Bitcoin, Ethereum and Dogecoin are still in a downward trend. When a stock has a series of lower lows or higher highs, it’s classified as a downtrend.
Lower lows indicate that the bears are in control, while lower highs in between signify consolidation. Traders can use moving averages to detect a downtrend, with shorter-term ones like the 8-day and 21-day exponential moving averages being most useful.
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Longer-term moving averages such as the 200 day moving average can be used to identify a downtrend.
Stocks can often indicate when the lowest low has been reached by printing a candlestick that reverses, such as a bullish engulfing, hammer, or doji. If a doji appears, a gravestone or dragonfly candlestick can be used to show the higher high. Additionally, resistance and support levels are common places where lower lows or higher highs take place.
In a downtrend, there are opportunities for both bulls and bears:
- Bearish traders who already have a position can be sure that the downtrend won’t stop unless the stock goes up. A downtrend can be a great time to look for the safest entry at the lowest high.
- Bullish traders can either enter or exit a trade at the lowest low. When the downtrend ends and the stock makes higher highs, traders can look to enter a trade.
Cryptocurrencies have endured a tumultuous few days, with Bitcoin, Ethereum and Dogecoin all suffering downturns in the second half of February. Each of the cryptos have seen a series of lower highs and lower lows, with Bitcoin’s most recent lower high occurring on Wednesday and the lowest confirmed low price at $23,999. Ethereum’s lower high was created on Thursday at $1,678, with a confirmed lower low of $1,557 on Feb. 25.
A bearish Marubozu candlestick could indicate further declines on Saturday, while an inside bar pattern could suggest that the crypto prices will consolidate Friday’s moves. Bitcoin has resistance above at $22,729 and $24.206, and support below at $21,313 and $20,545. Ethereum has resistance above at $1,564 and $1,717, and support below at $1,421 and $1,308.
Dogecoin has traded in a downtrend since Feb. 16, making a consistent series of lower highs and lower lows. Tuesday saw a lower high of $0.083, with the recent lower low at $0.078 on Feb. 25. Friday’s trading session produced a hammer candlestick, which might suggest an uptick in prices, but it is more likely that Dogecoin will begin to consolidate sideways. Support is located at $0.075 and $0.091.
