Technical Analysis - DERO
DERO/USD - 12/12/2019
As shown above, we are going to analyzing the technical status of DERO against USD.
We will be asking a series of questions to determine a reasonable conclusion:
What is the current market structure?
What we see here on the 1D is a broken downrange. DERO broke below the range support and has re-tested it locally in a bearish manner. This alone is nowhere a reasonable bullish set-up. Nevertheless, there are some signs and possibilities we will discuss in the following, turning the local bearish scenario into a possibly bullish one.
What is the possible bullish scenario from here?
Since we are in a very steep downtrend and have broken down the range support “only” on the daily timeframe, there is a chance of this being a fake-out. This comes with the reason that the re-test of the range support was very close to the break-down, which mostly does not leave much significance and could be just an effect of the recent market movements or simply due to its bearish momentum in this steep downtrend. Moreover, looking at this structure in more than just a local way, there is a good chance of the current structure turning into a falling wedge, which is in itself a bullish structure.
How would an experienced trader handle this situation?
The most straightforward answer is - patience. We are playing here a “Long-only” strategy, leading to the fact of needing a bullish confirmation before entering a position. Should this pair take the path of a bullish structure, then it would be only reasonable to wait for the bullish engulfing leading back into the range and then to look for entries at the re-test of the range lows. Anything else, or even entering right now would be comparable to a gamble and just increasing the risk unnecessarily.
Overall, DERO was coming from a steep downtrend and had a beautiful range going on for a few weeks. A quick break-down and recovery from a fake-out could, in fact, be a bullish sign and that the bottom has been found. Nevertheless, seeing the state of this pair as it is right now, no reasonable trader would be looking for an entry right now.
This Technical Analysis is made by Kong Trading. The provided Analysis should not be considered financial advice!