Many investors are excited about the Ethereum network’s uses.
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Ethereum has been a tear recently, rising more than 63% over the last month. Technical analyst Julius De Kempenaer told us why he thinks it will surge to $3,000. He also broke down how he trades cryptocurrencies based on price momentum and relative strength. See more stories on Insider’s business page.
While many argue that the digital currency space has long-term tailwinds and a strong fundamental investment case, its up-and-down nature in the short-term can be difficult for some investors to stomach.
But for near-term-minded investors, these price swings can be an opportunity to make money. Using technical analysis, traders can pick up on momentum patterns that tell them when the best times to buy and sell are.
One technical analysis tool is the Relative Rotation Graph, or RRG, which looks at the cyclical nature of asset prices. Its creator, Julius De Kempenaer, who is a senior technical analyst at Stockcharts.com (where traders can use the RRG tool), shared with Insider how he uses the apparatus to predict where prices might go next.
The RRG is divided into four quadrants: lagging, improving, leading, and weakening. The two axes it sits on measure price momentum (vertical) and relative price performance to another asset (horizontal).
In the example below, the performance of the market’s biggest tech stocks relative to the performance of the S&P 500 are shown.
While they don’t go in a perfect circular shape, assets typically move around the chart, touching all four quadrants. In the chart above, Facebook would be the safest buy, De Kempenaer said, as it is on its way to the “leading” quadrant. Buying when a stock enters the “leading” quadrant is also safe, but investors lose out on much of the gains by this point, he said.
However, assets can change from their expected trajectories,