ETHUSD Update: Small triangle forming just below the 392 target. Momentum remains bullish and a break of the 390 high can take this market into the low 400s. As long as the 368 minor support is maintained, this market is still in position to continue higher.
Triangles are often trend continuation patterns and a breakout above the one on this chart can provide another entry opportunity. Risk can be defined by the 368 support level which is the .382 of the most recent swing. This means if you buy into the low 390s, a reasonable stop would be in the low 360s which presents about 30 points of risk. The problem with this for me is the upside target and wave count. 460 is a potential target, but after a 5 wave completion, and no retrace, I believe a retrace is more likely than a push right up to 460 even though signs of weakness are very limited at the moment.
As one of the traders commented in a previous post, as price goes higher, risk increases. Even though there are no significant bearish signs, I am extremely cautious at highs, because for me these are levels to take profit, not open new positions. My swing trading plan instructs me to buy weakness and sell into strength, this is what stacks probabilities in my favor. I understand many are impatient and they want to buy back in especially as this market pushes higher, and what I would suggest is shortening your time horizon. Day trading is a much higher frequency style and allows for more opportunities, but you have to be decisive and nimble to get out if you are wrong while also having the discipline to exit for smaller profit targets. I don't recommend that style for these markets unless you have a very well defined plan and experience to stick to it. Keep in mind it is possible to employ multiple strategies, but again that requires experience. Otherwise you will become confused and take much larger risks than you should be.
As a swing trader I know that there are less opportunities, but when one appears, the potential is much greater because this style is set up to capture broad market movements, not small fluctuations, plus it requires much less attention. This style is a great one for beginners and people who can't watch their computer all day and that is why I write about swing trading compared to other time horizons. That is also why I do not have many entries to write about.
My plan is to wait for a retrace and bullish reversal. At the moment, I am eyeing 368 and 352 as my support levels that can offer a buying opportunity. I am not saying that price WILL go there, but if it presents that scenario, I can then look look for my entry criteria. If the market breaks the 390 resistance which is what is looks poised to do at the moment, then I sit it out and wait. If you want to buy the breakout, that is up to you, just be aware that it carries more risk, and make sure you know how to define it according to your profile.
In summary, this market continues to present strength. There are no clear signs of weakness or bearish momentum at the moment, the only thing I don't like is the wave count so I CHOOSE to stay out. The current triangle is likely to be broken to the upside which can take this market into the low 400s. In the bigger picture, after a 5 wave structure, markets are more likely to correct and we are facing a Wave 4 which can take this market into the low 360s to 350s which is where I am interested in looking for bullish reversal patterns. A push above 390 is a breakout signal and how you manage your risk from there is up to you and your trading plan. I am just sharing my perspective to provide some insight.
Thanks Marc! Still out for now but if 390 breaks it will be hard not to take a small position since I already sit in front of a screen all day anyway. I do like to sleep and that can be a problem entering at this level because as we all know, when it falls it can fall fast! (see last dip :)) I have slept great the last 2 nights since closing my position so I may be up for an all nighter, LOL! I'm with you in terms of a correction being due but I guess the big question is when that will happen. If I could only see a few hours into the future this would be so much easier! Thanks for keeping me grounded when it's so easy to get taken over by FOMO!
Abu_Batata
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@Symba, I wouldn't count on 390 breaking for a quick long position. I'd wait for an ATH break then do it, close after a $10 gain. Still risky either way.
MarcPMarkets
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@Abu_Batata, yeah not worth it, especially now that we see the result. Good thinking.
MarcPMarkets
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@Symba, you're welcome glad my evaluations are helpful.
Toto_
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@MarcPMarkets Question please, Does the higher price, where the retracement starts, generally means that it has a potential to retrace to a couple of support levels? The higher the price goes it has a better chance to retrace lower or it only depends on how strong is the support on what level ?
Abu_Batata
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@Toto_, Yeah so with every bullish move, you have support levels which are indicated by higher lows and moving averages. Ultimately when the price increases and possibly retrace, many bulls have buy orders place @ support levels. It's kind of like a self-fulfilling prophecy. Also vice versa and works with placing sell orders on resistance points set from prior bullish higher highs and moving averages.
Toto_
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@Abu_Batata, Hi thx for the answer, I understand that but I was wondering is there any correlation to how high the price goes with how low it retraces. For example if ETH goes to 400$ and retraces to 369$ would that mean if it goes to 420$ it has the same chance to stop at 369 support or it has a better chance of retracing to a lower support of 350$?
FernandoMocer
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@Toto_, I think, maybe Im grong because Im learning to. The bigger the move, the bigger the retrace, as Marc said, 350 to 369 could be an option, maybe a position in between could be the best way to ensure it. I think the volume is to low to take price up, but we don't know, now I prefer to wait to
Symba
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@FernandoMocer, Look at fib levels, as price goes up, fib re-tracement goes up. Usually hits one of these levels on retrace!
MarcPMarkets
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@Symba, yes the levels will rise with the proportion of the swing but there is no guarantee that the price will bounce off a level that is why further evaluation is required at those levels.