Waking up to the wall of male cicada mating sounds on the East Coast this morning, it was difficult not to notice the growing excitement over Ethereum finally breaking over 2800. The first thing that I wanted to know was - Where is volume and where are we relative to the larger pattern? Turning to the daily...
Despite the overnight gains, Ethereum continues to trade in an inclining wedge, a bearish pattern. Drilling down we can still see the small W that Ethereum printed over the weekend, which enriched well placed scalpers. Please refer to recent TA in the blog for more detail on the formation of these two patterns over the last several days. However, for those following along, we continue to see confirmation.
The path that the 50EMA cloud is tracing across the chart, in and of itself is telling. As price trades through a number of moving averages, we have to respect the formation of patterns precisely because price is trading through so many moving averages right now. On the 1H we have a convergence of the 800EMA, 200EMA, and 50EMA. Ethereum is seeking a true direction, we are quite possibly between a bull and bear cycle. It is important to recognize this. It's also important to recognize that, technically-speaking, the bull cycle is not fully broken, despite the May crypto crash. Let's just pull back a little on the chart above to observe a bit more history on the 50EMA cloud on the 1H.
I'm willing to bet that loyal readers will feel some relief looking at the second chart, it's more optimistic after all... those look less like M's and more like W's. Of course, the market makers don't want us to know and, hence, we are seeing a delayed confirmation on the final leg of this pattern. We are well into the chop.
The Bitcoin Fear Index fell to 15 today, down from 16 yesterday and 18 last week. Anytime that one is observing a wedge pattern on a chart, volume becomes an important factor. Increasing volume to the right side of the wedge can indicate that a breakout is imminent while the opposite can indicate a breakdown is coming and it's time to throw oneself into a short position or get to the safety of the sidelines. We see price rising overnight on a Sunday into Monday with increasing fear prevalent in the market and institutional money hours away? Isn't the market infamous for its false moves?
We'll be watching volume as the wedge appears to head to its terminus towards the end of the week. If the pattern proves to be the bear flag signal that it potentially could be, the flagpole on the left indicates the potential for a significant drop on the right back to sub- $1k price. First, Ethereum would have to test and fail at several levels of support, most notably the 200-day EMA between 1900 and 1950. Failure here would be significant as price bounced off the 200-day EMA at the bottom of the May crash.
The 50-day EMA is at 2742. The 200-day EMA is at 1934.
Notice the 50-day EMA in orange beginning to form resistance around 2750.
We will continue to watch volume and price action heading into the terminus of the wedge. Note the decline in volume and the uptick is RSI on the daily. RSI sits at 50.64 on the daily and 59.97 on the weekly indicating some room to run from here should money come into the market at this level.
A quick review of Investing 101 - Track your feelings about the market in a journal and observe how you felt and what price did when you felt that way. You'll likely notice that you should trade against your "feelings." This may well be one of those moments. Happy trading! Now go make some money!
