ETHUSD Perspective And Levels: Lower High Within Triangle?

4 Des 2017

ETHUSD update: This market is in a wide consolidation within a bullish trend which often means prices are poised to go higher, but upon further evaluation there is a lower high in place which is not a bullish sign. I realize no one wants to hear about a mixed market, but I have no choice but to write what I see.

Just a quick reminder, I chose to write about my swing trade strategy for these markets. I chose it because it allows me to write realistic and timely analysis that offers perspective. It is not the only strategy or market I trade, but it is the only one that I write about. On top of that, I am very selective with the trade calls. If you are looking for trades and action, there are many other analysts in this community that you can refer to. My analysis provides "perspective and levels" that you can use to make your own judgements on.

As far as this market goes, it is in a wide consolidation, while at the same time failing to break beyond the .618 resistance zone that is relative to the most recent bearish swing. On top of that, there is an outside bar (482.70 to 431) which establishes a lower high formation within the resistance zone. These are bearish signs while the overall triangle itself tends to be a trend continuation pattern which is bullish. So which carries more weight?

The triangle because the structure is larger in terms of time and is in line with the trend. For a swing trade, buying the breakout is tricky. Why? Because buying into this breakout is buying right into a minor resistance, rather than a reversal formation near a support. A break beyond the previous high of 482.70 will trigger a long signal, but the nearest reasonable target is the 500 to 510 area which is a potential 30 points while the risk is at least 35 to 40 points (446 area which is the .382 of the recent bullish swing). The reward/risk can be adjusted to about 1:1 with some stop adjustment, but for me, the trade entry criteria is not present. I am not going to force a trade, but if you are okay with the risk, and are monitoring this market frequently, then it can be a worthwhile break out.

For me to get long at this point, I would rather see price retest the 445 area for a double bottom or failed low formation on a smaller time frame. The reward/risk is much more attractive, and a higher probability for price to follow through. So that is my plan.

If price happens to break the 445 and 400 levels, then the 345 extension target (see previous ETH report) may still be in play. Remember, these markets sell fast and shake out weak hands quickly. That scenario will negate the bullish triangle that is present at the moment.

In summary, I get many questions about how this market will be affected by the introduction of BTC futures. My initial thought is it will take the spot light away from these markets but not have a dramatic effect on price range, that is my best guess. No one knows how the futures will affect these markets, not even the official experts, we just have to wait and see. This market is in a position to go either way since it is in the middle of the range. The bias is still bullish, but there are clear bearish signs that make for a very conflicting situation. When I evaluate swing trades, I look for more reasons to stay out of a market instead of getting in. I may miss moves, but avoid tons of REAL losses which is what has kept me in this game for so long, while many of my peers that I started with left the business years ago. Something to consider.

Comments and questions welcome. (I am trying to catch up on all these, and others have stepped up to address questions and concerns, and have done a great job which is nice to see, if you have a pressing question, a PM will get a faster response).