Howdy on a Sunday. It’s Matt here.

How’s your trading week going? If you’re into crypto, you’re probably still peeking at your screens waiting for a big jump.

It’s like staying up late hoping to catch a glimpse of Santa Claus when you were little. Except now you’re waiting on a decentralized blockchain full of shiny digital coins to explode. 

So what’s it gonna take for crypto to break out of its tantalizing coiling action? And why’s it taking … so … long?

Patience, grasshopper. It takes time to get that black belt in day trading. So let me fill you in on three key factors I’m looking at to determine when my favorite crypto coins will jump again… 

Three Factors That Can Influence a Crypto Bounce

Here are a few things I look at before entering any crypto trade. These factors can help me decide not just whether to enter a trade, but also how much risk I’m willing to take on if I’ve decided to execute a trade. 

#1 – History Doesn’t Repeat But it Rhymes

My mentor, Tim Bohen, loves to say this a lot. And it’s true. What does it mean exactly? It means that when we analyze a stock chart or a crypto chart, we look at historical trends, but we understand that past behavior doesn’t guarantee future results. Things could move a little differently this time around. They could move faster or higher or even zigzag, but generally speaking, the trend will likely look similar to how it behaved in the past.

Bitcoin (BTC) is still coiling in a long wedge that’s been trending up nicely. That being said, there have been enough sellers on the ascending line to keep the coin from truly breaking out. Here’s the thing: during BTC’s last bottoming out phase, it stayed in a similar type of basing action for four months! We’ve only been at it for one and a half months this time around. In the last cycle, when it finally broke out, it quadrupled. I can wait…

#2 – What is the Nasdaq Doing?

Someone wise once told me to think of any cryptocurrency as similar to buying a Nasdaq-listed stock. Why? Because it’s a risk-on technology. You’re buying into the promise of future technology. You’re buying into the blockchain ecosystem, not just the coins. Let’s face it, as a currency, there still isn’t a wide range of use for most cryptocurrencies. You can’t walk into a CVS Health Corp (NYSE: CVS) drugstore or your local Trader Joe’s and buy anything with them. 

Crypto symbolizes what’s new, innovative, and more than a little rebellious. The Nasdaq took a bit of a hit relative to the other indexes on Friday. The stellar jobs report was to blame. The economy is still strong, despite the Fed’s interest rate hikes. That means higher-than-expected future hikes might come, and that puts downward pressure on high-growth stocks like those in the Nasdaq. 

#3 – Pay Attention to the Wicks in a Candlestick

The best way to get a close-up look at the price action of any chart is the candlestick method. What I’ve been noticing with BTC is that every time it approaches the key level of $24,000 to $25,000, the candlesticks tend to come out with longer wicks on top. That means there’s still strong selling going on when it hits that resistance level. 

On the positive side, when it inevitably gets rejected back down to around the $21,000 level, you want to see long wick action at the bottom of the candlestick. This indicates that buyers are eager to jump in once it hits a support level they’ve decided to buy in at. When there’s a lot of wick to a candlestick and very little meat (the filled-in part), it’s likely that the action is exhausted and a trend reversal could be on its way soon. 

Conclusion

Somebody smart once said the only thing that’s certain is change. Right now the stock market and crypto markets are on the verge of change. 

So which direction are they headed in? How can you tell? Don’t miss Tim Bohen’s no-cost webinar on the state of the market tomorrow!

He’ll chat with a trading industry bigwig to uncover what stocks are likely to do once this earnings season wraps up. Don’t miss out!