Classic Divergence (Trend Reversal)
Bearish: Higher highs on price action but lower highs on the indicator
Bullish: Lower lows on price action but higher lows on the indicator
Hidden (Trend Continuation)
Bearish: Lower high on the price action and higher highs on the indicator
Bullish: Higher low on the price action and a lower low on the indicator
The purple line is resistance that has been in force since early February and we see that the price action hit that resistance again yesterday. Additionally, we see that the indicators show we hit the price action with hidden divergence on the , a very significant time frame. The clearly has a new high to a lower high on the price while the is only slightly higher presently compared to the high September 1st. The Hull is showing a formation that typically appears when the price action is overextended and about to reverse, usually impulsively.
Ideally when we drill down to a lower time frame we would be looking for the top to have classic divergence within it, indicating the trend will be reversing locally while continuing down globally due to the hidden divergence. The chart below shows that we only have slight classic divergence on the hourly time frame, which is usually not a clear enough signal to trade on by itself. Either the hidden divergence will be strong enough to bring the price action down, or the price action will need to chop sideways and maybe before we can build up enough classic divergence to see the bears maul the bulls. We may face a formation in the price action, or more subtly in the indicators while the price action appears to chop sideways.
Disclaimer on my position, I most recently shorted ETHUSD from 385 to 285 and closed my position while ETHUSD went to 265ish and then bounced out. I then longed from about 280 to 320 when I flipped back to going short because I did not expect this bounce to keep going. My short was in the money while we were at 195 and now I am holding bags while we are at about 240. I have bias to the short side and that is followed up with my money on the table so bear that in mind if you think that bias has affected my TA. Not Financial advice, so forth and so on. Unless we break the purple resistance line with some I am not closing my position, as I am gunning for a new low to get back in the money or (hopefully less likely) a retrace to take a managed loss.
I strongly recommend anyone here to read "The Ultimate Fud Post: There Fundamentally is no Bottom due to QT" to understand why I am so on Fiat alternatives. The global money supply is contracting, strengthening fiat relative to the crypto and precious metals asset classes in particular, and to a lesser (put still severe) extent real estate. In particular, ETHUSD does not have the prospect of an requiring a market cap of about $100B and therefore a price floor of $5,800. Even if you believe the notion that the floor of BTCUSD is at $5,800 there is the pragmatic fact that people would pull value from the other other cryptos to keep the value of BTCUSD up, and ETHUSD would still go down as BTCUSD continues to grow in dominance. And rememeber, even if you are correct globally and locally on your TA, if you go in over-leveraged you are still wrong.
As I see the hidden bearish divergence being the controlling factor of this current movement I see a head and shoulders being formed as our top. This suggest the commensurate target of about 155 with some stabilization and then probably a lower low. With the way the price is slipping there is no way to know if we are consilidating at 155 for a few hours or a week before the next leg down resumes.
As we see the support below we can target the rock bottom at about $110.
Things took a lot longer than I expected but we dropped out of the consolidation pattern with great affect. I think we will at least form a double bottom if now a new low. No guauarantee that the double bottom will be equal to the low of 167 but we should get close. When we do I'll be looking for signs of classic or hidden bullish divergence to predict an upswing. But that is in about 20 or 30 more dollars.
The 12h chart shows we continue to butt against resistance (I did tweak the line a tiny bit but we still have the points of contact going back to Feb). The Hull MACD is swinging down and the RSI has clear hidden divergence and it is also apparent on the MACD, but not as subtly. Volume is dropping off as we grind against this line and more likely than not we are going down, about 10-1. If you are bullish then you should be happy that the price will go down so you can accumulate some more.