Amidst all the DeFi and yield farming ruckus, Binance has recently come up with its new decentralized Binance Smart Chain [BSC]. This DeFi chain has access to its centralized exchange and Binance is putting up $100 million to support projects on the BSC.
Riding on the news of this exciting foray, Binance’s exchange token – BNB – has surged by 81% in the last 8 days. In light of Bitcoin’s drop and subsequent sideways movement, this is astonishing.
Binance Coin 2-day chart
Source: BNBUSD TradingView
The 2-day chart showed a huge divergence to begin with – The price had formed a higher high, while the RSI had formed a lower low. This can be identified to be a bearish divergence, one that will push the price lower.
Based on this, we can short BNB during this correction phase to make a quick buck.
The Stop-loss for this trade can be placed slightly higher than the recent high of $32.50- ie., at $32.61. Entry at the current price of $30.88 with a take-profit at 26.02 would yield a total R of 2.79 or a profit of 15.72%. The initial drop of BNB will be on to the white inclined trendline, and a bounce from here would push the coin further down and closer to the target.
After the price hits the intended target, the position can still be kept open. However, one can move the stop-loss to the take-profit point or use trailing stop-loss to maximize profits.
Even with DeFi’s hype, Bitcoin’s crash can put an end to it all. With the price closer than ever to the CME gap, people have been awaiting this drop. Additionally, moving stop-loss after the first take-profit level is hit is possible if Bitcoin were to drop violently. Considering Bitcoin’s sway over altcoins, we can expect BNB to follow as well. In extreme cases, the price of BNB could drop to as low as $21.86, which would mean a total drop of 29.27% or a total R of 5.24.