The Big Picture
Following a pretty extended drawdown bringing us to -55% off the highs, ETH is in the process of printing a Bullish morning star/harami type reversal (it’s not a textbook example of either, however they rarely are).
Price is now testing a historically significant area, and should it flip said area to support, then I would consider a revisit of the highs to be on the table.
Here’s how I’m gonna play this:
Now that’s sorted, let’s get on with it.
Weekly
Popping the cloud on, we see a textbook dip into the liquidity pool below cloud span B, followed by a swift rejection back out of the cloud. This is a significant sign of strength as (unlike BTC), it never closed within the cloud.
The primary cause for concern on the weekly is the flat nature of the cloud, which indicates a lack of HTF momentum. The lagging span is also threatening to cross under price, which would imply that HTF overhead resistance is increasing. The caveat to the last two points is that this is a weekly chart, and is therefore slow to react to changes in PA.
Daily
On the daily we see that ETH is retesting a significant supply zone, as well as a downtrending resistance band. Should this area be reclaimed, then it’s game on for bulls.
My target for bullish continuation is 3.5K. Break that, and 4K followed by ATH is on the cards.
Should we get rejected, then a retest of the 2.2-2.3K zone will be on the cards.
Switching to the cloud, we see that following an initial rejection price broke past the Tenkan. Should it overcome the current supply area, it’ll target the Kijun/Cloud span.
Assuming bullish continuation, we might get a decent Edge to Edge setup, however this is highly dependant on where we cross into the cloud.
For example:
Or
Overall we’re due a mean reversion move, and once we break past the current resistance band I see a re-test of 3.5K as a quasi-certainty.
Further indications of bullish continuation are the lagging span about to cross price from below, and the thickening cloud with flat edges, which are symptomatic of a lack of downwards momentum.
12H
The 12H is looking very very tasty, with the lagging span crossing price from below (switching from bearish to bullish bias), and the TK lines looking like they’re about to cross bullishly. Should this cross materialise, it’s a signal to close shorts (but not to open longs, as price remains under the cloud).
Unfortunately the dynamic of the cloud doesn’t really make taking an edge to edge attractive here, as the RR is 0.98.. Knowing when to sit on your hands is as important as knowing when to jump in.
The PA on the 12H also shows an accelerating local trend, with higher highs and lower lows. I am fairly confident that we’ll see continuation at this point.
Finally, my (as yet un-named) trend reversal strategy has printed a confirmed entry. As we remain under the cloud, I’ll be taking a ½ sized position on reclaim of the current resistance area and run tighter exit signals that normal. I’ll then enter with the other half for an E2E on the daily/close above 12H cloud depending on how things play out.
Tl;DR
The bottom is probably in
Whilst we’re not in Up Only territory yet, is seems that bears are getting exhausted, and that a retest of 3.5K is on the cards
Wait for confirmation, and don’t buy resistance
WAGM
Trade safe & have a great weekend
TCP
Great analysis as always.