ETHUSD Continues to Consolidate at a Critical 1.618 Fibonacci Level
Much depends on this 1.618 Fibonacci level at 1644. Will price break higher or turn lower and resume the downtrend? There is no need to predict. Price will give us the answer very soon.
A July 16 post by this author recognized both bearish and bullish counterarguments for the price action. Interestingly, those arguments remain unresolved with price consolidating (and stalling) right at the 1.618 Fibonacci projection of Wave W as projected from the start of Wave Y. This July 16 post stated: "Assuming this corrective move is an EW zigzag , wave Y would typically stall at 100% projection of wave W or a 127% (or perhaps even 161.8%). . . . Price could rally up to the 1.272 level near 1500 or maybe even to the 1.618 level at 1644. These are important levels to watch b/c the price action in recent days has the characteristic of counter-trend corrective action."
Interestingly, price stalled at this 1.618 Fibonacci level and quickly fell back below it after exceeding it by about only $1.59. Fibonacci levels can sometimes work quite well to identify where price may stall or reverse. See the yellow 1.618 line and the way price approached it and then reversed on July 18 (Monday) and touched it and reversed on July 22 (Friday).
Given that price continues to stall here, bearish momentum divergences are forming on the 2 and 4 hour charts. The 4-hour chart's momentum divergence appears in Chart 1.1:
Chart 1.1
Further, a potential head and shoulders pattern appears on the hourly charts. As some expert technicians have pointed out, however, in recent years, H&S patterns are less effective predictive patterns given that they everyone is watching for the same pattern. And a H&S pattern is not valid until it is confirmed by a breakout below the neckline (see the dotted blue line in Chart 2.1 below:
Chart 2.1
Next, the wave structure overall continues to appear corrective and countertrend. But this does not definitively resolve the question whether the current corrective / countertrend rally may carry much higher as part of a larger-degree retracement. As noted in a prior post last month, the low in ETHUSD lies a few points away from 872 where both major segments (legs) of the decline from the ATH have virtually achieved equality (Chart 3.1 below), a common relationship for both smaller and larger degree corrective patterns in asset prices under EW theory.
Chart 3.1:
Finally, for the bullish counterargument, note that the price action remains tightly coiled with the squeeze indicator showing a viable chance for a bullish breakout on intraday charts including the 4h chart above. And the breakout from the mid-June 2022 to mid-July 2022 range carries weight for the bullish view as well.
Please feel free to share your views in the comments. Post your related charts as well if you would like to add them to the discussion, even if your charts have a different view.
This post is not intended to present a trade idea but rather to present technical analysis of the current price action in ETHUSD.
ETH1!
ETHUSDT
ETHUSD
ETHUSD
DISCLAIMER: This post is published solely for educational / entertainment purposes and does not constitute financial advice or an investment recommendation and cannot account for any person's particular financial circumstances. The author would not want other investors / traders to lose money by relying *solely* on this idea rather than doing their own due diligence. Before entering any trade, please evaluate the risks of (i) the instrument / security being traded, (ii) the type of trade and its timeframe, (iii) risks inherent in that type of trade and its time frame, (iv) the inherent risks of shorting securities (presenting unlimited risk without hard stops in place), (v) the inherent risks of trading options, leveraged ETFs, and cryptocurrencies, and (vi) all financial risks arising each person's personal financial circumstances.
Much depends on this 1.618 Fibonacci level at 1644. Will price break higher or turn lower and resume the downtrend? There is no need to predict. Price will give us the answer very soon.
A July 16 post by this author recognized both bearish and bullish counterarguments for the price action. Interestingly, those arguments remain unresolved with price consolidating (and stalling) right at the 1.618 Fibonacci projection of Wave W as projected from the start of Wave Y. This July 16 post stated: "Assuming this corrective move is an EW zigzag , wave Y would typically stall at 100% projection of wave W or a 127% (or perhaps even 161.8%). . . . Price could rally up to the 1.272 level near 1500 or maybe even to the 1.618 level at 1644. These are important levels to watch b/c the price action in recent days has the characteristic of counter-trend corrective action."
Interestingly, price stalled at this 1.618 Fibonacci level and quickly fell back below it after exceeding it by about only $1.59. Fibonacci levels can sometimes work quite well to identify where price may stall or reverse. See the yellow 1.618 line and the way price approached it and then reversed on July 18 (Monday) and touched it and reversed on July 22 (Friday).
Given that price continues to stall here, bearish momentum divergences are forming on the 2 and 4 hour charts. The 4-hour chart's momentum divergence appears in Chart 1.1:
Chart 1.1
Further, a potential head and shoulders pattern appears on the hourly charts. As some expert technicians have pointed out, however, in recent years, H&S patterns are less effective predictive patterns given that they everyone is watching for the same pattern. And a H&S pattern is not valid until it is confirmed by a breakout below the neckline (see the dotted blue line in Chart 2.1 below:
Chart 2.1
Next, the wave structure overall continues to appear corrective and countertrend. But this does not definitively resolve the question whether the current corrective / countertrend rally may carry much higher as part of a larger-degree retracement. As noted in a prior post last month, the low in ETHUSD lies a few points away from 872 where both major segments (legs) of the decline from the ATH have virtually achieved equality (Chart 3.1 below), a common relationship for both smaller and larger degree corrective patterns in asset prices under EW theory.
Chart 3.1:
Finally, for the bullish counterargument, note that the price action remains tightly coiled with the squeeze indicator showing a viable chance for a bullish breakout on intraday charts including the 4h chart above. And the breakout from the mid-June 2022 to mid-July 2022 range carries weight for the bullish view as well.
Please feel free to share your views in the comments. Post your related charts as well if you would like to add them to the discussion, even if your charts have a different view.
This post is not intended to present a trade idea but rather to present technical analysis of the current price action in ETHUSD.
ETH1!
ETHUSDT
ETHUSD
ETHUSD
DISCLAIMER: This post is published solely for educational / entertainment purposes and does not constitute financial advice or an investment recommendation and cannot account for any person's particular financial circumstances. The author would not want other investors / traders to lose money by relying *solely* on this idea rather than doing their own due diligence. Before entering any trade, please evaluate the risks of (i) the instrument / security being traded, (ii) the type of trade and its timeframe, (iii) risks inherent in that type of trade and its time frame, (iv) the inherent risks of shorting securities (presenting unlimited risk without hard stops in place), (v) the inherent risks of trading options, leveraged ETFs, and cryptocurrencies, and (vi) all financial risks arising each person's personal financial circumstances.
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