Judging Markets at a Glance - ETH/USD Case Study
Now is a time to be very careful trading, even though price has seemed strong and doing well, if we take a closer look at a few points on the ETH/USD chart, we can vastly improve our trading outcomes.
I don't expect we're going to start a bull run soon, there seems to be some accumulation that needs to happen still. I'll explain through this post on why I believe this.
First, look how much ETH loves the $1550-$1850 liquidity zone. Even though it's broken below it multiple times, it's pretty much always returned here. This is a good indicator that this is our main accumulation zone for this cycle. Investors feel comfortable in this range. If it drops below, panic ensues, and the one time it moved above since June 2022 it was likely an intentional liquidation move.
Secondly, we can get a very good idea of when price is going to break up or down by using two indicators: RSI and Engulfing Candles.
I have highlighted some examples of these events with the vertical lines and arrows to indicate the RSI at the time of the engulfing candle. The rules are pretty simple:
- If you get a BULLISH engulfing candle AND the RSI > 50, that's a good indicator to go long. See the green arrows and lines for these.
- If you get a BEARISH engulfing candle AND the RSI < 50, that's a good indicator to go short. See the red arrows and lines for these.
However, if you get an engulfing candle but the RSI is on the other side of 50, that's not a strong enough signal to enter a trade. Price will either move sideways or opposite how it appears that price action is moving. See the yellow arrows and lines for these. It's best to avoid opening trades during these events.
Now, it appears that we're seeing some bullish price action happening, but we also have some gnarly RSI divergence, paired with the fact that the RSI is just barely pushing above 50 on the sequential engulfing candles. It's my opinion based on these two conditions we're currently seeing that we will see a brief increase in price, for ETH this should be to about $2000-ish. After which a quick sell-off will drop the price to the bottom and likely below the current long-term liquidity zone for a major accumulation event that will likely be the catalyst for the next bull run.
I would expect this large accumulation to take place in April, and although this is where most whales will pick up their bags which they will eventually sell at the height of the next bull run, I wouldn't expect the bull run to happen immediately. After accumulation, there's a good chance we'll trade sideways somewhere around the current levels for most blue chip currencies.
This might not be financial advice, but hopefully you have a good and simple framework for which to quickly analyze the state of a market using just price action and RSI!
Cheers,
_heyJonBray
I don't expect we're going to start a bull run soon, there seems to be some accumulation that needs to happen still. I'll explain through this post on why I believe this.
First, look how much ETH loves the $1550-$1850 liquidity zone. Even though it's broken below it multiple times, it's pretty much always returned here. This is a good indicator that this is our main accumulation zone for this cycle. Investors feel comfortable in this range. If it drops below, panic ensues, and the one time it moved above since June 2022 it was likely an intentional liquidation move.
Secondly, we can get a very good idea of when price is going to break up or down by using two indicators: RSI and Engulfing Candles.
I have highlighted some examples of these events with the vertical lines and arrows to indicate the RSI at the time of the engulfing candle. The rules are pretty simple:
- If you get a BULLISH engulfing candle AND the RSI > 50, that's a good indicator to go long. See the green arrows and lines for these.
- If you get a BEARISH engulfing candle AND the RSI < 50, that's a good indicator to go short. See the red arrows and lines for these.
However, if you get an engulfing candle but the RSI is on the other side of 50, that's not a strong enough signal to enter a trade. Price will either move sideways or opposite how it appears that price action is moving. See the yellow arrows and lines for these. It's best to avoid opening trades during these events.
Now, it appears that we're seeing some bullish price action happening, but we also have some gnarly RSI divergence, paired with the fact that the RSI is just barely pushing above 50 on the sequential engulfing candles. It's my opinion based on these two conditions we're currently seeing that we will see a brief increase in price, for ETH this should be to about $2000-ish. After which a quick sell-off will drop the price to the bottom and likely below the current long-term liquidity zone for a major accumulation event that will likely be the catalyst for the next bull run.
I would expect this large accumulation to take place in April, and although this is where most whales will pick up their bags which they will eventually sell at the height of the next bull run, I wouldn't expect the bull run to happen immediately. After accumulation, there's a good chance we'll trade sideways somewhere around the current levels for most blue chip currencies.
This might not be financial advice, but hopefully you have a good and simple framework for which to quickly analyze the state of a market using just price action and RSI!
Cheers,
_heyJonBray
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