Jun 09

IOTA / USD Breakout of the consolidation formation

When the broad market is directionless, moving in a tight range, traders should look for strong trends and put their money there. That is the case of IOTA, which started to show a strong bullish momentum that began at the end of May.

After reaching 0.2602, Iota’s price entered into a new consolidation phase forming a triangular structure in the last few days. Early in the morning, it made a reversal figure with a large lower wick followed by a bullish candlestick that moved its price to 0.2514.

Now, the price is consolidating near the top of the range with the stochastics at overbought and the price above the +1 sigma line of the Bolliger bands. After this, it is likely IOTA to continue its path to test the last 0.2602 high, and also pursue its way towards the next resistance level, at 0.2806. We see also, that IOTA moves above its 20-, 50-, and 200-period simple moving averages, which, together with the price above the +1 sigma line means a healthy bullish trend. On the fundamentals, side, IOTA is a key currency aimed at the Internet of Thinks, with a well-deserved reputation and history.

A long setup can be made with a buy stop order at 0.2516 and targets at 0.26 and 0.28. The first target will result in a reward/risk ratio below 1, but the second one will compensate this fact and make a well-combined reward, and lower the risk because the trader could trail the stop-loss level and make it Break-even after hitting the first target. The invalidation level for this trade should be set below the 0.2388 support line.

Summary of the Setup

Buy Stop entry: 0.2516

Profit Target 1: 0.26

Profit Target 2: 0.28

Invalidation Level: 0.2386

Combined Reward/Risk: 1.41

Dollar Risk: $13 on 1,000 IOTA units. Dollar reward: $18.33 on $1,000 IOTA units.

Position sizing: a 1% risk position sizing strategy would mean 769 IOTA units every $1,000 in the trading account.