With the market at extreme lows, and only a shorter term bullish swing to signal any hope for bag holders, the chart may be telling us there lower prices are on the horizon. I want to be clear at these levels is not a place to be shorting or reducing inventory, but to look at where Ethereum could potentially go in the near term. Is the worst behind us or is there potentially more pain to come for those of us holding Ethereum?
With the market at extreme lows, and only a shorter term bullish swing to signal any hope for bag holders, the chart may be telling us there may be lower prices are on the horizon. I want to be clear at these levels is not a place to be shorting or reducing inventory, but to look at where Ethereum could potentially go in the near term. Is the worst behind us or is there potentially more pain to come for those of us holding Ethereum?
It has been a long hard ride to the downside for Ethereum and one of the reasons we reduced inventory back in the 185-195 area. Initially we thought maybe the 3rd leg of the correction would end around 175, but after a month of no strong impulse wave, our position was if Bitcoin gave way the pain for Ethereum holders would be compounded.
The failure of Ethereum to push through the broader down trend was a sign of weakness of an extreme low at 175. We informed our premium members we were shaving off some Ethereum and Bitcoin Cash and closing out our NEO and OMG positions entirely. Though we were hopeful for a recovery in Bitcoin this was our hedge in the event the market went South.
Off the extreme lows Ethereum has once again failed to push through the down trend and until it can do so we remain on the sidelines. The recent price action on the weekly is not showing signs of a recovery the consolidation is pointing to lower prices in the short term. Our initial target is 100 with a lower target of 71. A break of 71.0 would be devastating for Ethereum and could result in a quick swing to the 40 area.
That is the downside, however the market is trading already at extreme lows and the risk here is a fake-out trapping short sellers into a bear trap. Let take a look at the shorter term time frame to get a better idea. Again I would not short this market in this position especially when a short trade is so obvious.
ETHUSD (Weekly Coinbase)
Ethereum has a hard time with bearish trend lines as indicative of the weekly chart. Normally we do not draw arrows on our charts, and this is by no means a proposed path, but one we are looking to see evolve. There are two things going for the bulls here with the first being the magnitude of the recent bullish swing. Back in September the magnitude of the swing was just over 50% off the low. The magnitude of the recent bullish swing was nearly 100%.
What this may be implying is the market is recognizing how oversold Ethereum is and is looking to buy in on any weakness. We are not looking at the retail investor, but signs larger investors are stepping in and buying, or absorbing the selling pressure. On the initial swing lower in November, we saw buyers step in around the 100 area. Though not in enough volume to overcome the selling pressure.
The swing off the 82.0 area (a projection level of the previous swing) stuck, and we saw buyers take out the previous consolidation levelat 100, and top around where we expected to see renewed selling pressure in the 160-165 area. Remember there was two months of buying above 165, and this often leads to those holding the bag to reduce losses and sell into momentum. This is why we seldom see a vertical recovery after a long selloff.
So what is the second thing? Simply we are at extreme lows and Ethereum sentiment is following. The market has simply forgotten about Ethereum and the focus has been mostly on Bitcoin. As a contrarian trader or investor these are a few of the signals we look for. If Bitcoin can mount a rally renewed enthusiasm will likely bring all ships in the harbor up. However, I am not adding just yet. There are other coins I personally like better.
The question here is will buyers be once again attracted to the 100-120 range. Only the market knows for sure, but this is what we are looking at for evidence of a recovery. If Ethereum fails to hold the 100 area than this could imply we are dealing with a trouble coin.
ETHUSD (Daily Coinbase)
Overall three are many coins we like better than Ethereum, however, we still maintain a small inventory. Until we see Ethereum push through the former consolidation area we can not be bullish on the coin. We want to be in the coins with the best charts at lows not ones that look horrible.
Though we have not given up entirely on Ethereum we remain cautiously optimistic. Sentiment can change on a dime, but until we see continuation of buyers we simply remain sidelined.
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