ETH 4th Wave HNS Pattern
Eth has been following BTC so closely they both have almost identical setups right now and are more or less in the same phase of their respective EWT structures. So one recommendation I would have is to make your BTC plays, have your eth orders filled out and ready. But put in your ETH orders second because its going to do what BTC does for right now. Take last night as an example. Eth fell under the 200 EMA on the 4 hour and started to drop like a rock. But BTC hit it multiple times and could not break through. So what happened? BTC bounced off 200 EMA and as a result ETH pumped right back up through the 4 hour 200 EMA like it wasnt even there.
So for this play we are banking on the continuation of the larger (what Im calling Primary) structure that ETH has been adhering to for some time now. This structure was initiated with the bottom of wave 1 back in December when ETH bottomed out at around $80.
Which now brings us to what appears to be a large Head and Shoulders Pattern forming as the top of Primary Wave 3 and what is shaping up to be wave 4.
Leg A of the 4th Wave ABC correction appears to have brought us to an important level of support where we touched last night, the neckline. Now, ordinarily, I would not do a FIB Retracement by these standards, but, if you take what we are presuming is the start of the HnS structure, the base of sub wave 4 of the 3rd wave, to the peak of the 3rd wave, we get some interesting Fib levels.
The standard rule of thumb is, of course, to take the fib levels starting from the bottom of wave 3 to the top of wave 3 and get your levels from those two points of reference. However, when I have a clearly identifiable structure, such as the HnS we are looking at currently, it is often useful to at least take the fib retrace from the start of that structure to the peak and see what we get.
In this case, we find that the neckline, the level of support that we tapped last night at the 226-230 range, coincides with the Golden Pocket fib levels between .618 and .65 for the HnS structure. We had a significant bounce off that level last night but its also a significant level to watch in another regard. This was perhaps the most significant SR Flip that we have had during this whole structure. We busted through those levels on wave subwave 3 of Primary wave 3, then came back and tested them strongly for wave 4 before rallying off of them as support for wave 5. SR Flips that occur on higher time frames tend to be more significant, and we saw this level thoroughly tested on the 4 hour, as well as being tested to a lesser extent on the daily.
We now find ourselves on a subwave 2 retracement of the C leg down from Primary Wave 4. This will complete the right shoulder of the HnS structure. I believe after this we will see a selloff which will peak with this second wave, followed by a more explosive 3rd wave down where we will test this support level once more.
Three possible strategies traders can consider in this scenario are as follows:
1. Try and stack your shorts in accordance with key fib levels. You will see the chart has a third fib retracement that starts with the peak of Primary Wave 3 at $288, and ends with the test of support last night at the $230 level. Following these fib levels, we would start stacking shorts at the .50 level around $260, then double the amount of contracts at .618/.65 around $267-269, and finally, double that amount at .786 levels around $275. This would be a low loverage position 3-5x max.
2. Try and time the top after it starts to drop. Be on the lookout for a bearish divergence on a higher time frame, possibly the 1 hour or 4 hour, and if you see momentum dying out while price is rising, look for a bearish candlestick pattern, wait for a drop and jump in for the ride!
3. The ultra conservative approach would be to wait for last nights resistance level at $230 to be pierced. That could possibly coincide with another key SR flip as we might potentially get a 3rd wave down that pierces that level, then a 4th wave retrace that tests it as support. Then you could ride it down to the lower targets specified. I firmly believe if we lose that $227-$230 level, we will see a solid drop to $180.
Best of luck!
So for this play we are banking on the continuation of the larger (what Im calling Primary) structure that ETH has been adhering to for some time now. This structure was initiated with the bottom of wave 1 back in December when ETH bottomed out at around $80.
Which now brings us to what appears to be a large Head and Shoulders Pattern forming as the top of Primary Wave 3 and what is shaping up to be wave 4.
Leg A of the 4th Wave ABC correction appears to have brought us to an important level of support where we touched last night, the neckline. Now, ordinarily, I would not do a FIB Retracement by these standards, but, if you take what we are presuming is the start of the HnS structure, the base of sub wave 4 of the 3rd wave, to the peak of the 3rd wave, we get some interesting Fib levels.
The standard rule of thumb is, of course, to take the fib levels starting from the bottom of wave 3 to the top of wave 3 and get your levels from those two points of reference. However, when I have a clearly identifiable structure, such as the HnS we are looking at currently, it is often useful to at least take the fib retrace from the start of that structure to the peak and see what we get.
In this case, we find that the neckline, the level of support that we tapped last night at the 226-230 range, coincides with the Golden Pocket fib levels between .618 and .65 for the HnS structure. We had a significant bounce off that level last night but its also a significant level to watch in another regard. This was perhaps the most significant SR Flip that we have had during this whole structure. We busted through those levels on wave subwave 3 of Primary wave 3, then came back and tested them strongly for wave 4 before rallying off of them as support for wave 5. SR Flips that occur on higher time frames tend to be more significant, and we saw this level thoroughly tested on the 4 hour, as well as being tested to a lesser extent on the daily.
We now find ourselves on a subwave 2 retracement of the C leg down from Primary Wave 4. This will complete the right shoulder of the HnS structure. I believe after this we will see a selloff which will peak with this second wave, followed by a more explosive 3rd wave down where we will test this support level once more.
Three possible strategies traders can consider in this scenario are as follows:
1. Try and stack your shorts in accordance with key fib levels. You will see the chart has a third fib retracement that starts with the peak of Primary Wave 3 at $288, and ends with the test of support last night at the $230 level. Following these fib levels, we would start stacking shorts at the .50 level around $260, then double the amount of contracts at .618/.65 around $267-269, and finally, double that amount at .786 levels around $275. This would be a low loverage position 3-5x max.
2. Try and time the top after it starts to drop. Be on the lookout for a bearish divergence on a higher time frame, possibly the 1 hour or 4 hour, and if you see momentum dying out while price is rising, look for a bearish candlestick pattern, wait for a drop and jump in for the ride!
3. The ultra conservative approach would be to wait for last nights resistance level at $230 to be pierced. That could possibly coincide with another key SR flip as we might potentially get a 3rd wave down that pierces that level, then a 4th wave retrace that tests it as support. Then you could ride it down to the lower targets specified. I firmly believe if we lose that $227-$230 level, we will see a solid drop to $180.
Best of luck!
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