ETHUSD update: Outside bar develops within the 741 to 845 resistance zone which is a significant sign of selling as anticipated. Now the question is how far can these markets retrace?
In recent reports, I have been warning about buying into resistance zones. As I have described before, these areas are places to sell, to lock in profit and capitalize on the ample liquidity made possible by the reactive herd of buyers. There is no way to know when the selling will assert itself, the best we can do is define where the probability is higher and simply avoid buying.
The 741 to 845 resistance zone is the .618 area relative to the recent bearish structure. That is a 100+ point range that price can fluctuating within before showing signs of weakness. This means it has plenty of room to seduce traders who are easily consumed by the natural impulses of greed and fear.
The fact that an outside bar has formed on this time frame is clearly a bearish signal. It implies that this market is more likely to continue it’s retrace which can lead price back to the 656 level (.382 of current bullish structure). That is also where the bullish trend lines are located which adds to the attractiveness for a new long swing trade.
In summary, when we take swing trades, we are looking to capture a broader market move in the near term. This could be over the next few days, to few weeks, which all depends on how the market unfolds. In order to consistently capitalize on such opportunities, it is of great importance to let probabilities guide decision making, NOT opinions, feelings or reactions to news. This is what best practices are all about which is what governs our signal service. It does not mean every trade will result in a winner, but it does provide a much greater chance of a positive performance over time. This market, like all markets, will retrace, and it will offer new opportunities, it is just a matter of listening, waiting and evaluating. 656 is the next predetermined level on our radar, which means we will wait for price to get there, or readjust our outlook in the face of an entirely different configuration.