Lido DAO Breakout Incoming, or Profitable Ranging Market?
Just like the rest of the market, Lido DAO (LDO) has been in a range since the November crash induced by the collapse of FTX. However, the consolidation may come to an end with a breakout. If the breakout does not occur, we can use the trading range to make profit with the RSI with region crossovers!
Consolidation Period
LDO entered the current consolidation period on November 9th, when it hit a low of $0.87. Since then, it has ranged between a low of $0.87 and a high of $1.30.
This is an extensive consolidation range, consisting of almost 50%. You could also make a sizeable profit by just buying close to $0.87 and selling close to $1.30.
However, as we can see, the resistance level is around $1.30, so the swing highs can temporarily overcome $1.30 just to come back down again.
Currently, the price is at the resistance level, but it has failed to perform a breakout as of 2023-01-03. To confirm a breakout, we need a candle to at least close above the $1.30 resistance level. Currently, we just had a high wick above this level.
If LDO manages to break out of this consolidation, the price will likely go to the next resistance at $1.85. The $1.85 level represents the last high which was made back in November before the crash, and stands at 50% higher than the $1.30 level.
Therefore, if you choose to buy at the breakout and it materializes, you could be looking at a 50% profit at the very least.
However, if the breakout does not occur, we can use the trading range to make a profit!
Suitable Technical Indicators
When the price is in a range, oscillators are usually the best choice to use, as they can accurately let us know where the bottom and top of the range are. This will allow you to buy low and sell high.
As such, an indicator like the Relative Strength Index (RSI) with region crossovers may be well suited for making a profit in such market conditions.
The RSI with Region Crossovers on Cryptohopper sends a buy signal when the price comes back from being oversold. It then sends a sell signal (if you configure it as sell on Cryptohopper) when the price comes back from being overbought.
Therefore, it mitigates the risk that you buy a coin that continues to drop and takes advantage of a strong rally without exiting prematurely.
In the example above, we have set the following settings for it:
RSI Periods 7
Oversold threshold 25
Overbought threshold 70
Assuming that you trade with all your funds and taking into account a 0.1% fee per trade, this strategy would have yielded a profit of 35% in the last 2 months.
While this is an impressive result for the current market conditions, please note that this strategy will not work well in a bear market, and you may end up with significant losses if you do not use a stop loss.
