ETH's Response to Support Levels Should Offer More Clues

已更新

Primary Chart: ETH's Key Support Levels Approaching Based on Fibonacci and a Measured Move

ETH's Recent Rally since June 2022

ETH made its YTD low on June 18, 2022, a day or two after many equity indices. Since then it has rallied, albeit not in a straight line, significantly. The rally has carried ETH approximately 1149 points higher so far, which is approximately a 130% gain. This rally has now reversed at least in the short term with the minor swing high made on August 14, 2022 at $2029.90.

Whether the recent rally constitutes a trend reversal or a mere bear rally remains uncertain. As Federal Reserve Chair Jerome Powell spoke yesterday at an economic summit at Jackson Hole, Wyoming (US), he communicated the need for continuing restrictive monetary policy and tightened financial conditions until persistent inflation eases back to the 2% target. So macroeconomic headwinds suggest cryptocurrencies, equities and other risk assets may struggle at best or have more downside at worst. While not making a call for a bottom in ETH or any other risk asset, this article notes that markets can bottom even when macroeconomic news remains quite bleak.

Having identified the fundamental arguments relating to whether ETH may have reversed its downtrend, this article will not spend additional time forecasting the primary or longer-term trend in ETH. Instead, key price action and support levels will be discussed that may help evaluate the nature of ETH's trend in coming weeks. If the rally from the June 2022 low constitutes a major trend reversal (back to an uptrend), then the support levels identified will likely hold when tested. Sometimes a test can include a break that fails and quickly recovers back above the support, which is also called a whipsaw or false break.

ETH's Critical Support Levels for the Current Decline

The primary chart above shows key support levels using Fibonacci proportions. The Fibonacci retracements cover the range from the June 18, 2022, low to the August 14, 2022, high. These support levels lie nearby given ETH's significant decline on August 26, 2022. Interestingly, some of these key levels also align with important price supports at significant lows or consolidations. Two examples are described in the following list:

The .618 retracement (yellow line) of the two-month rally coincides with the price support (dark blue line) at swing highs in late June and early July 2022.
The .50 retracement (green line) aligns with lower end of a mid-July 2022 consolidation as well as the low on August 26, 2022 at 1488.00.

The concept of a measured move may also be relevant to the current multi-day decline. For a measured move, a corrective wave A is projected from the start of a projected wave C. Where A equals C is where the measured move zone begins. The measured move zone ends where wave C of a correction equals wave A times a Fibonacci proportion of 1.272. These two support levels lie at $1217.53 (lighter blue line) and $1080.02 (teal line), which are shown beneath the .618 retracement line on the Primary Chart above. Note that this article does not presume a measured move is underway—that would require predicting that the current decline will constitute a corrective pullback within an uptrend. As mentioned, no position is taken on whether the current decline resumes the downtrend or corrects a newly started uptrend.

In short, a measured-move level provides an area of support to watch to determine the nature of the recent decline. If price reverses at the measured move zone, then this increases the odds that the rally has further to run. If the measured-move zone fails, then this increases the odds of retest and break of the 879-880 lows in June. This is why the $1080 to $1217 area is important to watch over the coming days to weeks.

ETH's Shift in Shorter-Term Momentum

ETH's shorter term momentum has shifted to negative in the past two weeks. The shorter-term EMAs provide a good starting point for evaluating shorter-term momentum. Shorter-term in this context means several days to several weeks. Price has broken back below, and held below, the 8-day EMA for about 10 days. Over the past week, ETH's price tried at least twice to recover the 8-day EMA but failed back below by the close at the end of day. The 21-day EMA has now been broken too. Both EMAs slope downward and the 8 EMA has crossed below the 21 EMA, confirming the ongoing bearish momentum in the short-term.

Supplementary Chart A: ETH's 8-Day and 21-Day EMAs Show Short-Term Bearish Momentum

ETH's RSI on the daily chart confirms near-term shift in momentum. Note how RSI peaked towards the end of the recent bear rally around 71.42 on the daily time frame. This level is fairly overbought for a daily chart especially considering that the YTD price action has been largely bearish and choppy.

Supplementary Chart B: ETH's RSI Shows Short-Term Bearish Momentum

Note the sharp downtrend in RSI on the chart above as evidence by RSI remaining well below its EMA on the daily chart and RSI remaining within a well-defined, steep downtrend.

Inferences from ETH's Technicals

In conclusion, ETH's 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.

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 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.

注释

Correction: On the Primary Chart, Wave B of the measured move should be labeled as Wave C of the measured move.

注释

H&S pattern also appears to have formed, though these patterns have become less reliable since everyone "sees them" now. In any event, using traditional H&S measuring objectives from the breakout below the neckline (shown below), a price target would equal about $1015.

注释

ETH seems to be finding support initially at the .50 retracement at 1455. But given weakness in the Nasdaq 100 and NQ futures this evening, the measured move area at 1217.53 and the .618 R at 1319.45 should still be considered more likely near term areas where price could trade. But price must break and hold below 1455 first.

注释

Check out an update on BTC's levels and price action this week in my latest post: