Bear markets have their own unique trading psychology. Frequently, when a portfolio manager has a big loser in their portfolio, the temptation can be to sell a big outright or relative winner to make up for losses.
Looking at the big downdraft in EOS (11/30), it’s possible that EOS is being hit by selling because it was a “winner” relative to Ethereum.
Looking at the chart of EOSEthereum (Figure 1), we see it falling below its 12-week moving average combined with a potentially bearish weekly candle. The 12-week moving average was a good thing to use historically to a point that start of big moves up in EOSEthereum. So, it may work well to identify a change in trend to the downside.
With the Bitcoin bounce stalled, portfolio managers may continue to sell EOS simply because it is good relative performer vs. Ethereum.
Historically, it may make sense to compare EOS to Bitcoin back in the Mt. Gox days. Back in 2011, Bitcoin was billed as the new shiny object just as EOS was billed as a new, improved version of the Ethereum blockchain.
If that comparison holds true, EOS may wind up bottoming the way Bitcoin did in 2011. In 2011, Bitcoin bottomed 76 percent away from it’s 200-day moving average (Figure 2). If EOSUSD follows the same pattern, EOSUSD could head for $1.67 (Figure3).
Bottom Line: Big bear markets frequently make their way to even out the best relative performers. EOS seems to be no different. With the EOS ICO priced at $.99 USD, there is a lot room to move lower from $3.