ETHUSD Falling Apart Or Buying Opportunity?
Updated
ETHUSD update: After retesting the .618 resistance zone, this market has broken the 450 support area and is now sitting within a support zone. The big question is: Is this a good time to buy?
My first impression of this price action is investors are selling their ETH to buy more BTC because of it's relentless new highs in anticipation of the futures contract starting on Sunday. Markets like BTC are extremely rare, and are great if you are in, but the futures are going to bring it back to reality. I believe the futures are going to attract a lot of volume away from the current exchanges because of their security, flexibility and credibility (something current exchanges are missing).
This market is behaving more in line with reality. In reality, prices correct to some degree. And at the moment, this price is sitting within the .618 support zone of the recent bullish swing that failed to make a new high. Aren't support zones a place to buy? They are, except when momentum is bearish which is the case here.
In support zones like this, I prefer to see a chart pattern reversal before getting long. On the current time frame or even smaller. Or I would like to see a candle stick reversal off of a retested level like a double bottom.It is not happening here. Just like there are no confirmation for shorts in BTC, there are no confirmations to go long in ETH for a swing trade at the moment.
Since the momentum is still bearish, I am expecting price to retest the 385 low, and possibly the bullish reversal zone somewhere above 361. These are the levels where I will be watching for reversal formations to go long for swing trade in anticipation of a retest of the 470 to 488 resistance zone (.618 of previous bearish swing).
IF price decides to reverse sooner without a formation then a bullish break of the 435 resistance (.382 of recent bearish swing) is the signal I will need to see. At that point I can look for a shallow retrace, or some other signal to start buying. Confirmation is key, because what happened at 455 can happen again. This is what I am expecting BTC to behave more like once balance returns (and the majority of U.S. investors and traders will be able to short).
In summary, buying a pull back in a broader bullish trend is in line with my trading plan, BUT some form of confirmation is required. This process helps to filter out many false starts or buying too early. It is no different from shorting BTC right now which I have been warning against because there are no signs at all. Do you want to see what a market that is setting up for a sell off looks like? The two week double top formation in this market is a prime example. Relative to the current formation, any price action below 385 will be extreme and offer the best reward/risk, just wait for a reversal formation. Usually before the market starts working its way back up, it will show a pattern on a smaller time frame (look at the long tails at the 400 and 385 low that were tested a week ago). When it comes to TA and these markets, there is a huge amount of ignorance which will serve as an advantage as these markets return to reality. Remember TA is most effective for evaluating momentum and reward/risk on smaller time horizons. People who can put this into perspective and recognize its limitations are the ones who have a better chance at achieving consistency. Normalcy does not imply a bear market, just one that does not go up in a straight line. The BTC situation is breeding unrealistic expectations and reinforcing bad habits which will be the mechanisms that offer the more experienced traders opportunities when these markets regain some normalcy.
Comments and questions welcome.
My first impression of this price action is investors are selling their ETH to buy more BTC because of it's relentless new highs in anticipation of the futures contract starting on Sunday. Markets like BTC are extremely rare, and are great if you are in, but the futures are going to bring it back to reality. I believe the futures are going to attract a lot of volume away from the current exchanges because of their security, flexibility and credibility (something current exchanges are missing).
This market is behaving more in line with reality. In reality, prices correct to some degree. And at the moment, this price is sitting within the .618 support zone of the recent bullish swing that failed to make a new high. Aren't support zones a place to buy? They are, except when momentum is bearish which is the case here.
In support zones like this, I prefer to see a chart pattern reversal before getting long. On the current time frame or even smaller. Or I would like to see a candle stick reversal off of a retested level like a double bottom.It is not happening here. Just like there are no confirmation for shorts in BTC, there are no confirmations to go long in ETH for a swing trade at the moment.
Since the momentum is still bearish, I am expecting price to retest the 385 low, and possibly the bullish reversal zone somewhere above 361. These are the levels where I will be watching for reversal formations to go long for swing trade in anticipation of a retest of the 470 to 488 resistance zone (.618 of previous bearish swing).
IF price decides to reverse sooner without a formation then a bullish break of the 435 resistance (.382 of recent bearish swing) is the signal I will need to see. At that point I can look for a shallow retrace, or some other signal to start buying. Confirmation is key, because what happened at 455 can happen again. This is what I am expecting BTC to behave more like once balance returns (and the majority of U.S. investors and traders will be able to short).
In summary, buying a pull back in a broader bullish trend is in line with my trading plan, BUT some form of confirmation is required. This process helps to filter out many false starts or buying too early. It is no different from shorting BTC right now which I have been warning against because there are no signs at all. Do you want to see what a market that is setting up for a sell off looks like? The two week double top formation in this market is a prime example. Relative to the current formation, any price action below 385 will be extreme and offer the best reward/risk, just wait for a reversal formation. Usually before the market starts working its way back up, it will show a pattern on a smaller time frame (look at the long tails at the 400 and 385 low that were tested a week ago). When it comes to TA and these markets, there is a huge amount of ignorance which will serve as an advantage as these markets return to reality. Remember TA is most effective for evaluating momentum and reward/risk on smaller time horizons. People who can put this into perspective and recognize its limitations are the ones who have a better chance at achieving consistency. Normalcy does not imply a bear market, just one that does not go up in a straight line. The BTC situation is breeding unrealistic expectations and reinforcing bad habits which will be the mechanisms that offer the more experienced traders opportunities when these markets regain some normalcy.
Comments and questions welcome.
Note
Update: I am LONG 420.27 STOP 396.45 TARGET 453 R/R: 1.4/1Based on 4 hour chart formation. Report to follow.
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