ETH's 41% 3-day Move: Bearish View and Bullish Counterargument
Updated
ETH has gained 41% in this recent 3-day bounce off the lows July 13, 2022. The pattern appears to be an EW zigzag , which has characteristics of a corrective pattern running counter-trend. Disciplined traders who caught the pattern and the lows on July 13 and sold the top at $1400 made a hefty and well-deserved profit.
Please note that post is not a trade idea nor a trade recommendation but rather a analysis of current PA using Elliott Wave and Fibonacci. Looking at the overall trend on higher time frames, it is a downtrend by any definition. The trend has weakened as Tradersweekly's analyses (see posts linked below) has discussed in recent days.
Every trend has counter-trend corrective moves. Bear markets (downtrends) tend to have some of the sharpest rallies that exist, and some statistical analyses of equity markets going back three decades have found that the strongest rallies tend to occur more frequently in bear markets. These moments where the short-term countertrend appear the most convincing often offer the best trend entries. The same is true in uptrends. In bear markets, though, these sharp rallies tend to fake out those who have fear of missing out, and pressure the short sellers, who must buy to cover, causing more upward movement.
Assuming this corrective move is an EW zigzag , wave Y would typically stall at 100% projection of wave W, or 127% (or perhaps even 161.8%). Using this EW / Fibonacci analysis suggests the end of wave Y may lie near 1400 (1397), where price briefly penetrated today and then stalled. 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.
One counterargument for ETH bulls
The counterargument should also be considered. Price reversed a few weeks ago right near 872. This was a key level where the two major legs of the current downtrend are approximately equal. 872 is clearly a level of importance as support as discussed in my previous post (linked below "Could ETH Be Nearing a Bottom with Blood in the Streets"?) This 872 level *might* be a place where the end of the correction lies on an intermediate-term basis—assuming the entire correction down from the ATH can be characterized as being a A-B-C (or W-X-Y ) type pattern within the context of an even larger-degree 5-wave impulse move upward that remains incomplete. That's a question for EW analysts with much more time / expertise than this author. Any input on the larger ETH trend would be welcome in the comments!
Please note that post is not a trade idea nor a trade recommendation but rather a analysis of current PA using Elliott Wave and Fibonacci. Looking at the overall trend on higher time frames, it is a downtrend by any definition. The trend has weakened as Tradersweekly's analyses (see posts linked below) has discussed in recent days.
Every trend has counter-trend corrective moves. Bear markets (downtrends) tend to have some of the sharpest rallies that exist, and some statistical analyses of equity markets going back three decades have found that the strongest rallies tend to occur more frequently in bear markets. These moments where the short-term countertrend appear the most convincing often offer the best trend entries. The same is true in uptrends. In bear markets, though, these sharp rallies tend to fake out those who have fear of missing out, and pressure the short sellers, who must buy to cover, causing more upward movement.
Assuming this corrective move is an EW zigzag , wave Y would typically stall at 100% projection of wave W, or 127% (or perhaps even 161.8%). Using this EW / Fibonacci analysis suggests the end of wave Y may lie near 1400 (1397), where price briefly penetrated today and then stalled. 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.
One counterargument for ETH bulls
The counterargument should also be considered. Price reversed a few weeks ago right near 872. This was a key level where the two major legs of the current downtrend are approximately equal. 872 is clearly a level of importance as support as discussed in my previous post (linked below "Could ETH Be Nearing a Bottom with Blood in the Streets"?) This 872 level *might* be a place where the end of the correction lies on an intermediate-term basis—assuming the entire correction down from the ATH can be characterized as being a A-B-C (or W-X-Y ) type pattern within the context of an even larger-degree 5-wave impulse move upward that remains incomplete. That's a question for EW analysts with much more time / expertise than this author. Any input on the larger ETH trend would be welcome in the comments!
Note
$1506 (1.272 projection) discussed above served as viable resistance for ETH over the past 24 hours. Wave structure suggests the corrective rally is nearly complete. Perhaps one more push higher to 1.618 (1644), perhaps not.Note
ETH has stalled at the 1.618 projection of the move off the lows. The 1.618 projection means that the first wave off the June 18 lows is projected from the start of the second larger-degree wave to a Fibonacci 1.618 proportion of the first wave. Given the strength of the move today across equities and crypto, it could be that the bullish counterargument looks a little stronger than it has over the past 7-8 months. See my post linked below titled "Could ETH Be Nearing a Bottom with 'Blood in the Streets'?"
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