ETHUSD Perspective And Levels: Head And Shoulders Reversal Sign?
Updated
ETHUSD Update: Head and shoulders formation appearing under the 306 resistance. Is this a sign of a reversal? How does the BTC pullback factor in? I will address these questions. Also the magnitude of this consolidation has prompted me to reevaluate my wave count.
First is the head and shoulders which most of you know is a bearish reversal chart formation. Yes it is a bearish sign, but as I have mentioned in other reports, I do not give much weight to smaller degree formations in the face of broad bullish trends. As bearish as this may look, no supports have been taken out yet. This helps me not to short strong markets, and I learned this lesson the hard way, by shorting strong markets that would suck me in with bearish chart patterns. If you are long, just remember the supports and the BTC relationship will be a better guide in my opinion.
The support levels that are still in play are the 279 and the 263 levels. I have written about these extensively in previous reports. If 263 breaks, it will signal a larger consolidation is in play rather than a broader bearish trend and will open the door to the 230 support area. IF this market were to break 208, that would put the broader trend in question.
Now about the wave count. Some people have asked me about how I counted the current bullish wave and I explained my reasoning behind my Wave 3 extension, but as it turns out, the extension appears to be a subwave 5 of a larger 3. Which means we are in a larger degree Wave 4. Even though my original count was slightly different, it did not change the anticipated direction, only the expected magnitude of the current Wave 4. And that is why I do not get caught up in exact wave counts. When the market prompts me to adjust, then I adjust. There were some traders who picked up on this current wave count before the market made it obvious, thank you to the people who pointed this out.
The larger degree Wave 4 puts the 263 support level into perspective. A bullish reversal off of that level would be a convenient spot for the larger degree Wave 5 to begin. The larger Wave 5 can take this market up into the 350 to 380 area and that is going to be my target. Risk will have to be determined once this market shows some price stability.
This takes me to the BTC relationship since there is a lot of varying opinions on this. BTC has been retracing to a larger extent, and as expected, this market is following. Now some may be watching these currencies against BTC as a pair, and sure if BTC is declining at a faster rate, the price on that chart will go up. I am not watching those, I am watching against the US dollar. Why? Because that is my base currency which means that we cannot forget to consider the strength and weakness of the USD. The dollar has been weak, but if you look at recent activity, it is in the process of retracing back up which should exert more pressure on the BTC pullback. All the markets that have been relatively weak against BTC as it pushed highs are now pulling back significantly, like LTC and XRP. My point here is it's more than just a BTC/altcoin relationship. It's more like BTC/Altcoin/Fiat relationship. Something to keep in mind.
In summary, this market is in a larger degree Wave 4 which in my opinion is the most predictable wave. There is room for one more leg up (Wave 5) which can push prices up into the 350 to 380 area. I am not predicting this event, instead I am gathering clues that support the likelihood of this scenario. 263 Is the key support I am watching for a bullish reversal along with price stability in BTC and weakness returning to the dollar. If it sounds confusing, remember keep it simple and evaluate one market, I just refer to others for clues. When this market heads back up, signals will present themselves.
Comments and questions welcome.
First is the head and shoulders which most of you know is a bearish reversal chart formation. Yes it is a bearish sign, but as I have mentioned in other reports, I do not give much weight to smaller degree formations in the face of broad bullish trends. As bearish as this may look, no supports have been taken out yet. This helps me not to short strong markets, and I learned this lesson the hard way, by shorting strong markets that would suck me in with bearish chart patterns. If you are long, just remember the supports and the BTC relationship will be a better guide in my opinion.
The support levels that are still in play are the 279 and the 263 levels. I have written about these extensively in previous reports. If 263 breaks, it will signal a larger consolidation is in play rather than a broader bearish trend and will open the door to the 230 support area. IF this market were to break 208, that would put the broader trend in question.
Now about the wave count. Some people have asked me about how I counted the current bullish wave and I explained my reasoning behind my Wave 3 extension, but as it turns out, the extension appears to be a subwave 5 of a larger 3. Which means we are in a larger degree Wave 4. Even though my original count was slightly different, it did not change the anticipated direction, only the expected magnitude of the current Wave 4. And that is why I do not get caught up in exact wave counts. When the market prompts me to adjust, then I adjust. There were some traders who picked up on this current wave count before the market made it obvious, thank you to the people who pointed this out.
The larger degree Wave 4 puts the 263 support level into perspective. A bullish reversal off of that level would be a convenient spot for the larger degree Wave 5 to begin. The larger Wave 5 can take this market up into the 350 to 380 area and that is going to be my target. Risk will have to be determined once this market shows some price stability.
This takes me to the BTC relationship since there is a lot of varying opinions on this. BTC has been retracing to a larger extent, and as expected, this market is following. Now some may be watching these currencies against BTC as a pair, and sure if BTC is declining at a faster rate, the price on that chart will go up. I am not watching those, I am watching against the US dollar. Why? Because that is my base currency which means that we cannot forget to consider the strength and weakness of the USD. The dollar has been weak, but if you look at recent activity, it is in the process of retracing back up which should exert more pressure on the BTC pullback. All the markets that have been relatively weak against BTC as it pushed highs are now pulling back significantly, like LTC and XRP. My point here is it's more than just a BTC/altcoin relationship. It's more like BTC/Altcoin/Fiat relationship. Something to keep in mind.
In summary, this market is in a larger degree Wave 4 which in my opinion is the most predictable wave. There is room for one more leg up (Wave 5) which can push prices up into the 350 to 380 area. I am not predicting this event, instead I am gathering clues that support the likelihood of this scenario. 263 Is the key support I am watching for a bullish reversal along with price stability in BTC and weakness returning to the dollar. If it sounds confusing, remember keep it simple and evaluate one market, I just refer to others for clues. When this market heads back up, signals will present themselves.
Comments and questions welcome.
Note
Long at 294.76 (50% position size). Stop at 274. Will write about it in next report coming out today.
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