ETHUSD: Price Still Vulnerable WIthin Triangle?

2018年2月27日

ETHUSD update: Now that a positive catalyst has once again sparked a BTC rally (no surprise) this market has more context to rally even though it has been somewhat sluggish compared to BTC and LTC respectively. The good news is this market is coming off a major support zone with momentum that is backed by supportive structure. How do you buy if you missed the trigger?

During the minor retrace lead by BTC, this market retested the 872 to 739 major support zone (.618 area of broad bullish structure). Within this area the 824 level (.382 of recent bullish structure) was also tested which lead to an outside bar. This configuration is not only a very bullish sign (the newly formed bullish trend line) but it was followed by a minor higher low that served as a long trigger within the major support zone.

I did not write about this particular trigger because I was more focused on BTC and LTC opportunities, I also did not take this trade because I was not overly enthusiastic about this market's lack of responsiveness. So the big question: Is now still a good time to buy?

The answer depends on your outlook and how much pain you are willing to take. 816 is the current swing low and reference point to measure risk from. And that is the lower risk swing trade perspective. If you are looking to enter for a broader move, you have to be okay with the possibility of price retesting the 739 lower boundary of the broad support zone (it can happen). This increased risk means if you are too aggressive with your size, or too nervous about pull backs, you are more likely to get shaken out if any bearish drama follows.

If the momentum is bullish, shouldn't price just keep going now? Why worry? Speculating in any financial market is like playing a game of musical chairs, once the music stops, you better be close to a chair. In trading this means you must always consider your position if everything falls apart and then ask yourself if you can handle it. What can go wrong in this market? The 921 resistance is still in play and beyond that the broad bearish trend line in the 940 area also stands in the way. With bullish momentum supporting price, these resistances are more likely to break, but IF they don't, especially if price action forms a lower high, that would make this market more vulnerable to bearish catalysts or short term drama.

In summary, the overall market structure at the moment is more of a consolidation than a clear trend (as defined by the converging trend lines). This broad triangle is one giant continuation pattern in my opinion, and offers plenty of bullish potential if you are able to hang on during the over reactive pull backs. A break of the lower boundary of this broad triangle is not a major bearish sign, but it could lead to the retest of lower supports especially in the face of any newly formed head and shoulders pattern. I only mention the bearish possibilities because they are important to recognize when assessing the type of risk you are willing to take. Overall I am bullish on this market, it is just a matter of waiting for a price that is in line with my criteria, especially since I am holding other positions that are correlated to this market generally.

Questions and comments welcome.