Dogecoin and other meme coins are seeing a boom off the back of Elon Musk's takeover of Twitter.
It isn't isolated to the Doge. A slew of meme coins have been born since Elon tweeted an image of a Shiba Inu dog wearing a Twitter t-shirt for Halloween.
It's hilarious that his tweets never fail to pump these things.
As technicians, we pride ourselves on never being dogmatic in our approach. If new data that invalidates our initial thesis presents itself, we're always willing to flip our approach.
Yesterday, we wrote that Ethereum testing a significant support zone suggests this rally is mean-reverting in nature. In that same breath, though, we noted that it's wise to treat every chart on its own merits.
If you adopt an overly broad picture of markets, you'll often miss some of the most straightforward trading opportunities.
With all that said, a few names are shaping up nicely in this tape.
Mean reversion is a universal element of the world we live in.
Reversion to the mean is a statistical phenomenon stating that the greater the deviation of a variable from its mean, the greater the probability that the next measured variation will deviate less.
In other words, an extreme event is likely to be followed by a less extreme event.
In financial markets, mean reversion is everywhere. This is especially the case in bear markets when prices dramatically rally following prolonged periods of sustained weakness.
As John Roque, one of the GOATs of technical analysis, would say, "We’re not in a reversion to the mean business. This is instead a reversion beyond the mean business."
Specifically, asset prices retracing to their statistical average isn't the rule, it's the exception. Rather, in most cases, asset prices will often overshoot their "averages."
With crypto markets bouncing over the last week, it raises the question, is this just yet another mean reversion rally, or does this move have some legs?
We came into the week anticipating some volatility expansion out of this range, which could potentially be playing out given yesterday's action.
This was the largest daily price change for most coins over the last month. Ethereum's broken out of this short-term trading range, with Bitcoin following closely behind.
It's nearly that time when we get a fresh batch of monthly candlesticks.
We only perform this exercise once the candlesticks are completed. But, sometimes, you want to cheat and peep a few days early.
What's great about monthly candlesticks is that it takes us a mere half hour to get through them all, which is only six hours a year.
We can't emphasize enough the level of value-add for such a brief amount of time.
It forces us to take a step back, and it gives us no choice but to identify the direction of the primary trends. We use them to put shorter-term trends into context, which is especially important in this choppy price action.
So, no matter your time frame, identifying primary trends and then working from there is a huge advantage over a blind bottom-up approach.
In the current state of the crypto markets, the overwhelming majority of names are in greater than 80% drawdowns.
That's it -- that's the post. There's nothing to discuss.
Bitcoin and the rest of the asset class are still a choppy mess. There's no conviction in taking longs until price action can shape up in a more bullish manner.
Given the lackluster market conditions, this letter will act as yet another brief interim update.
A month on, the same can still be said about most of the asset class. Just go chart by chart, and you'll see a ton of coins sitting at their lows.
This is such an illiquid tape, with only the heartiest of HODLers remaining, that it wouldn't take much selling to send these laggards on another leg lower.
Cardano, Decentraland, Gala, Kyber, Polkadot -- just a little push is all it'd take...
