Ethereum drifted lower on Tuesday, initially pulling back to the 50 Day EMA before bouncing off that level and forming a red hammer. This shows buyers are catching the falling knife as Ethereum approaches an ascending trendline and support area, but ETH may not have found a bottom yet.
(November 4, 2020 8:00 PM EST)
Outlook: Ethereum continued its micro-downtrend, reaching down to graze the 50 Day EMA at $370 before bouncing up to the $385-390 area. I think ETH will be more susceptible to market pain in the short-term as legacy markets experience election and COVID-inspired turbulence and Bitcoin dominance remains high. However, I think ETH likely finds support not far below here or the $350 level, which would print a higher low in this ascending channel and uptrend. The line in the sand at this point is $294, which is roughly the large, round psychological number, 200 Day EMA, and bottom of the ascending channel. I would expect a lot of buying in that area, and stop-losses to be set perhaps at the $275-250 triggers.
I still love ETH as a fundamental investment and the technicals all point to higher prices, albeit not necessarily tomorrow. That's okay; crypto market cycles move in 'dog years' relative to legacy markets. Last year most crypto sentiment was extremely bearish, yet now most crypto sentiment is largely bullish. Things shift quickly in markets, especially in crypto. It won't take long for Bitcoin dominance to revert to the mean a bit, season volatility to subside, and ETH 2.0 to begin its initial launch before we see ETH lift off like BTC has over the past few months.
Support: Look for support at the 50 Day EMA around $368 and then $350. As mentioned previously, I need to see an impulsive wave higher above $400 again to be able to call it support. That didn't happen, so ETH pulled back, and now I'm looking for a bounce off support to reattempt $400. Longer-term support should be found around $300 which is only a few bucks higher than the 200 Day EMA, which is nearby.
Resistance: $400 is my near-term resistance until ETH breaks decisively above it. Once ETH breaks through $400, we'll then look for confirmation of support and then look higher to $450 and $500. Given the volatility in markets and bearish tone, ETH may see further weakness as collateral damage.
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