MarcPMarkets

ETHUSD: Watch For These Signs As The Bounce Continues.

BITFINEX:ETHUSD   Ethereum / U.S. Dollar
ETHUSD update: From 863 to 492 in two days as all the coins experience a larger than usual retrace. The recovery leg is where things can be tricky, and I will explain what to look for in this market in order to determine if it will continue back to the highs or develop into a broader head and shoulders pattern.

As I wrote about in my previous BTC report, if you are investing, there is no safety in these markets. The best thing you can do is buy nearer a low and have a plan that guides your choices IF the market decides to retest the low, or consolidate before retesting the high. This plan is something you must develop, it does not matter how new to investing you are.

As far as this market goes, price has recovered quickly off the 492 level which is at the lower boundary of the .618 area support of the recent bullish structure. The long wick and break of that candle's high are bullish signs that make it reasonable to anticipate a higher low formation around the 628 level which is the .382 of the current bullish swing.

Also any retest of the 573 to 500 zone (.618 of recent bullish structure) offers an attractive area to look for bullish reversals on smaller time frames (4 hour, 1 hour). This 628 and 573 to 500 areas offer attractive reward/risk for swing trades in particular, which means you will have a predefined stop and target which have to be determined at the time of the trade. These levels are attractive because they are the proportionate resistance levels that the market can reasonably retest.

The first level of resistance is the 712 to 772 zone (.618 of recent bearish swing) which price is testing as I write this. A push through this area (very possible) can take price back into the 815 area where price sold off initially. This resistance is not only a projected target on the weekly (written about in previous report), but now a potential double top area which makes it a good profit target for swing trades.

The current resistance zone is tricky. Recent price action typically pushes through these initial zones after a more dramatic sell off, only to test the highs and go beyond. This is not a behavior that can be counted on. So I say there are two key behaviors to watch for: A tight consolidation within the zone forming a small bull flag which can be interpreted as the market is going higher, or a failed high formation, bearish pin bar (s), or a bearish outside bar which will establish a lower high and imply a retest of support levels.

If a lower high unfolds in this area, it would complete the right shoulder of a head and shoulders formation which is a very bearish sign. All I am saying is keep your eyes open because it can happen. A bearish head and shoulders can take price back to the 500 level or slightly lower which would be a attractive investment opportunity in my opinion.

In summary, before taking any position, you must first decide on an outlook. If it's long term, then you have to size appropriately in terms of the risk you can afford and stick it out no matter how low it goes. That's investing, NOT swing trading. If a short term move is what you are more interested in capitalizing on, then you must pay attention to the structures and enter the market when the price presents a formation that makes sense in terms of reward/risk. The other thing is you must EXIT at least a portion of the trade when a target is reached. If you want to then transition into a longer time horizon for a smaller portion of the position, you will have that choice (as long as you are willing to give back your profit in the smaller position). Where you are exiting the trade should be determined before you enter, no matter what time frame or strategy you are employing. In terms of my plan, I prefer to look for a swing trade at one of the predetermined supports and evaluate from there.

Question and comments welcome.
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Comments

Solid report Marc ... Quality writing as per usual .... thank you !!!
+3 Reply
@dwk8081, thank you. Glad you find my analysis helpful.
Reply
would you say one of these key behaviors has shown themselves yet?
+2 Reply
Amit26 armenhammer21
@armenhammer21, I think I can see a Head & Shoulders bearish pattern
Reply
@Amit26, it's definitely there, I'm now just trying to figure out if the price is going to keep going down. Seems like the bears have had trouble keeping it down, at least on GDAX. I kind of hate being on that exchange because the price is always $30-40 more than the other exchanges and if I was another one I would've already bought low.
+1 Reply
Amit26 armenhammer21
@armenhammer21, Right now ETHUSD is $741 in GDAX and $609 in Bitfinex !! WTF !!
Reply
Amit26 Amit26
@Amit26, Correction, I mean $709 in Bitfinex
Reply
Amit26 armenhammer21
@armenhammer21, There was a clear H&S pattern and so I was expecting the price to go down further, but it went up instead !!
Reply
@Amit26, yeah, I was kind of disappointed. So now instead of buying back in at over $100 less I only bought in $20 less than the price I sold. Literally I sold at $740 yesterday before the drop and on the other exchanges it got as low as $550. Woulda got 6.5 more ether. I thought it would go down on GDAX, but nah. That's why I want to transfer my ether to Bittrex's exchange. Bittrex is more on par with the other exchanges. Even though for a brief moment today before I bought, Bittstamp was $10 higher than GDAX, but now of course there is a $20 difference favoring GDAX. But yeah, almost $40 lower on Bittrex and Bitfinex. I'm about to part ways with ol' GDAX if there is a way to trade USD on Bittrex. That's where I have my XRP.
Reply
MarcPMarkets armenhammer21
@armenhammer21, GDAX prices in a premium, That is why their price is usually different than the other markets. This relationship is not locked and occasionally fluctuates, but the point is this: you have to determine your trades based on the patterns of the chart you are trading in order to avoid confusion. Otherwise you have to recognize the difference. Do not expect Coinbase prices to reach Bitfinex prices to justify a trade entry.
+1 Reply
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