A Tactical Look at the Alts

Louis Sykes
February 8, 2022

In yesterday's note, we outlined our macro Bitcoin/crypto thesis.

In essence, the market is leaving a considerable oversold zone driven by modestly strong spot flows by whales and institutions.

Now that momentum is back in favor of the bulls on the break of 41,000, we're beginning to deploy our elevated cash positions back into Bitcoin and a variety of trades.

In today's note, we'll discuss a few names we like monitoring for long and short positions and how we're approaching price action from a tactical perspective.

Let's begin by addressing shorter time frame developments.

Here's an annotated Bitcoin liquidation map:

There's a lot going on in this chart, so let's break it down:

  • This chart simply shows levels where traders will get liquidated. Price moves towards liquidity.
  • Over the last few days, we've seen a stable trend of short liquidations while longs have entered into somewhat late positions.
  • The Cumulative Liquidation Level Delta shows there's a delta of $30B worth of longs exposed to liquidations. This plots the cumulative sum of the difference between all long and short liquidation levels across time. When positive, it suggests more longs are exposed to getting liquidated, and vice versa for shorts.
  • There's a concentrated amount of long liquidations around 43,000 to 38,000.

Looking tactically, Bitcoin's currently running up against its first resistance level of 45,700.

The higher-likelihood scenario in our view is the market retraces back to 41,000 and 38,000, punishing late long traders.

Along with Bitcoin, many alts have experienced a considerable bounce in this period.

Following these moves, it's difficult to say the risk vs reward is favorably skewed in our favor of initiating a ton of positions at current levels, and in the case of a handful of names, they're even setting up for tactical shorts.

Here's a few of them.

We're short Gala $GALA below 40 cents.

We like Sandbox $SAND short below 5.

Theta $THETA remains a short below 4.

To be clear, these shorts are tactical in nature.

Looking structurally, there's a handful of names we like from the long side.

Terra $LUNA is one of them. We like LUNA long above 53 with a target of 82.

We're long Kusama $KSM on dips back to 150 with a target of 290.

As for Solana $SOL, our patient approach has been paying off.

We only like SOL long above 120; otherwise it's a no-touch.

We like buying FTX $FTT on strength above 50.

And, of course, one of the only names we've been exposed to over the last few weeks is gold.

Gold has a really nice shape here. Buying the next break from this contraction is an incredibly high-conviction long. We currently have a starter position via PAX Gold $PAXG, but we'll be adding to it on the next upward break.

In Brief

So, there you have it: There's a trade for everyone in this market, even the gold bugs.

Looking over tactical time frames, there's a high probability we see Bitcoin retest support. As we said in yesterday's note, we're anticipating some form of sideways contraction following this break before the next real leg higher.

To take advantage of this, we like tactically shorting a handful of names that have bounced back into supply. Over longer time frames, we want to be looking for names to position ourselves on the long side.

Here's a summary of today's trades:

  • Short GALA below 0.40.
  • Short SAND below 5.
  • Short THETA below 4.
  • Long LUNA above 53, target 82.
  • Long KSM above 150, target 290
  • Long SOL above 120.
  • Long FTT above 50.
  • Bullish PAXG. Aggressively add to positions on the next break.

Weekly Chartbook

You can click here to download this week's chartbook.

And be sure to fire us a line if you have any questions.

Allstarcharts Team

 

 

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