ETH: The Downtrend Has Resumed, Lows Will Be Retested
Primary Chart: Bollinger Bands and Fibonacci Channel with Key Support Zones HighLighted
Summary: The path of least resistance continues to be downward. Key support levels were broken just above at 1319 and 1455, which are now resistance. Bollinger Bands are widening, signaling a trend move in the coming week. After a whipsaw move to the upper band, price is now persistently walking the lower band. An oversold bounce could occur intraday at any time, but within a few weeks (perhaps days depending on the volatility in markets overall), price may reach a conservative target of $1100-$1126. The more aggressive target is a range from June 2022 lows at $880 up to $1027.
On August 27, 2022, a technical-analysis post on ETH (linked in the above chart on the August 27 price bar) noted that ETH's response to support levels would offer clues as to when the downtrend would resume. The relevant specific support levels shown on that date were $1455 and $1319, which are key Fibonacci retracement levels. Both these levels have now been broken to the downside.
The August 27, 2022 post also discussed the following, which were applicable at the time:
"Technicals do not provide an answer about whether the intermediate-term or long-term trends have reversed from this year's bear market. They do, however, help see that the near-term path of least resistance is somewhat lower. And they give us price levels and zones to watch to help determine what ETH's next move may be. And such levels may also help traders analyze whether the multi-week uptrend from June 2022 lows will continue further or whether it will be deemed a powerful bear rally within a remarkable downtrend."
Now that these two specific technical levels have been violated to the downside, the conclusion that the near-term path of least resistance is lower has now been strengthened and confirmed.
The August 27, 2022, post also noted that momentum in the short-term, as measured by RSI and two EMAs, was bearish. This continues to hold true. See the updated RSI chart below (daily). Although ETH had a bit of a rally in the first half of September surrounding its merge, RSI remains bearish. The last major RSI peak occurred on September 10, 2022. Compare this peak with the July 18 and August 13, 2022, peaks in RSI, and one can see that the final rally in September had waning momentum compared to earlier rallies over the summer.
Further, momentum remains weak for ETH, and a new low was just made as the prior RSI low from late August 2022 was broken to the downside. But RSI should be watched—if the selling intensifies—for OS levels nearing the extremes from prior tradeable / interim lows this year.
Supplementary Chart: RSI for ETH on the Daily Chart
Finally, key moving averages such as the 8-day and 21-day EMAs remain bearishly sloped and stacked. This removes the need for talk of reversals and price predictions. As long as the 8-EMA is sloped downward, the path of least resistance continues to be downward.
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Please note that this technical-analysis viewpoint is short-term in nature. This is not a trade recommendation but a technical-analysis overview and commentary with levels to watch for this week. Also note that countertrend trading, e.g., trading a rally in a bear market, is tricky and challenging even for the most experienced traders. Countertrend trades are lower probability trades as well.
This technical-analysis viewpoint could change at a moment's notice should price move beyond a level of invalidation. Further, proper risk-management techniques are vital to trading success.
Author's Comment: Thank you for reviewing this post and considering its charts and analysis. The author welcomes comments, discussion and debate (respectfully presented) in the comment section. Shared charts are especially helpful to support any opposing or alternative view. This article is intended to present an unbiased, technical view of the security or tradable risk asset discussed.
DISCLAIMER: This post contains commentary published solely for educational and informational purposes. This post's content (and any content available through links in this post) and its views do not constitute financial advice or an investment or trading recommendation, and they do not account for readers' personal financial circumstances, or their investing or trading objectives, time frame, and risk tolerance. Readers should perform their own due diligence, and consult a qualified financial adviser or other investment / financial professional before entering any trade, investment or other transaction.
Summary: The path of least resistance continues to be downward. Key support levels were broken just above at 1319 and 1455, which are now resistance. Bollinger Bands are widening, signaling a trend move in the coming week. After a whipsaw move to the upper band, price is now persistently walking the lower band. An oversold bounce could occur intraday at any time, but within a few weeks (perhaps days depending on the volatility in markets overall), price may reach a conservative target of $1100-$1126. The more aggressive target is a range from June 2022 lows at $880 up to $1027.
On August 27, 2022, a technical-analysis post on ETH (linked in the above chart on the August 27 price bar) noted that ETH's response to support levels would offer clues as to when the downtrend would resume. The relevant specific support levels shown on that date were $1455 and $1319, which are key Fibonacci retracement levels. Both these levels have now been broken to the downside.
The August 27, 2022 post also discussed the following, which were applicable at the time:
"Technicals do not provide an answer about whether the intermediate-term or long-term trends have reversed from this year's bear market. They do, however, help see that the near-term path of least resistance is somewhat lower. And they give us price levels and zones to watch to help determine what ETH's next move may be. And such levels may also help traders analyze whether the multi-week uptrend from June 2022 lows will continue further or whether it will be deemed a powerful bear rally within a remarkable downtrend."
Now that these two specific technical levels have been violated to the downside, the conclusion that the near-term path of least resistance is lower has now been strengthened and confirmed.
The August 27, 2022, post also noted that momentum in the short-term, as measured by RSI and two EMAs, was bearish. This continues to hold true. See the updated RSI chart below (daily). Although ETH had a bit of a rally in the first half of September surrounding its merge, RSI remains bearish. The last major RSI peak occurred on September 10, 2022. Compare this peak with the July 18 and August 13, 2022, peaks in RSI, and one can see that the final rally in September had waning momentum compared to earlier rallies over the summer.
Further, momentum remains weak for ETH, and a new low was just made as the prior RSI low from late August 2022 was broken to the downside. But RSI should be watched—if the selling intensifies—for OS levels nearing the extremes from prior tradeable / interim lows this year.
Supplementary Chart: RSI for ETH on the Daily Chart
Finally, key moving averages such as the 8-day and 21-day EMAs remain bearishly sloped and stacked. This removes the need for talk of reversals and price predictions. As long as the 8-EMA is sloped downward, the path of least resistance continues to be downward.
________________________________________
Please note that this technical-analysis viewpoint is short-term in nature. This is not a trade recommendation but a technical-analysis overview and commentary with levels to watch for this week. Also note that countertrend trading, e.g., trading a rally in a bear market, is tricky and challenging even for the most experienced traders. Countertrend trades are lower probability trades as well.
This technical-analysis viewpoint could change at a moment's notice should price move beyond a level of invalidation. Further, proper risk-management techniques are vital to trading success.
Author's Comment: Thank you for reviewing this post and considering its charts and analysis. The author welcomes comments, discussion and debate (respectfully presented) in the comment section. Shared charts are especially helpful to support any opposing or alternative view. This article is intended to present an unbiased, technical view of the security or tradable risk asset discussed.
DISCLAIMER: This post contains commentary published solely for educational and informational purposes. This post's content (and any content available through links in this post) and its views do not constitute financial advice or an investment or trading recommendation, and they do not account for readers' personal financial circumstances, or their investing or trading objectives, time frame, and risk tolerance. Readers should perform their own due diligence, and consult a qualified financial adviser or other investment / financial professional before entering any trade, investment or other transaction.
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