This article will identify the strong support levels that Ethereum must maintain in order for price to move higher.
Ethereum, like Bitcoin, has experienced a significant and forceful drive lower during the New York trading session. Currently (1245 EST), Ethreum is trading lower by -1.92% from its open. It’s had a reasonably wide distribution range so far – moving as high as $188.09 to as low as $180.71. Unless there are some significant changes to the overall intraday trend, Ethereum will close lower for the second consecutive day. If Ethereum were to close at the present value of $182.68, that would represent a -4.93% drop from Thursday’s open. However, the weekly candlestick still shows a close above the open. The current weekly open is at $181.73, so if Ethereum close out this weekly candle at its present value, this will be one tight range. The short term outlook for the broader cryptocurrency market is a bearish one, but Ethereum has maintained essential support levels.
The chart above is Ethereum’s Weekly chart. The pattern above is a Harmonic Pattern known as a Bullish Bat. This pattern is a discovery of the world’s leading expert on Harmonic Patterns, Scott Carney. He discovered this pattern back in 2001 and identified specific characteristics of this pattern. Like all Harmonic Patterns, the Bullish Bat requires price to enter specific Fibonacci retirement and extension zones. Of all the forms of technical analysis, Harmonic Patterns are perhaps the most stringent in their application. There is no room for interpretation with the ratios in the construction of these patterns. Harmonic Pattern Analysis is an absolute form of analysis. And while the inflexibility of this style of study may be cumbersome, what it lacks in flexibility it more than makes up for in the positive expectancy of a trade setup. The Bat Pattern is one of the most powerful reversal patterns in Carney’s work – the strength of the reversals after a verified completion is often extreme. While Ethereum has had some strong moves higher, we have yet to observe a healthy and trending movement higher, indicating that this pattern may be invalidated. We need to look to smaller timeframes to confirm either bullish or bearish biases.
The chart above is Ethereum’s 4-hour chart. Again, we can see a Harmonic Pattern. This pattern is the same pattern we observed on the weekly chart, albeit on a faster timeframe. This Bullish Bat Pattern shows that the most recent downside move in Ethereum could very quickly halt. The red horizontal line represents the VPOC or Volume Point of Control. The VPOC is part of a style of Volume Analysis known as Volume-At-Price Analysis. With this particular form of analysis, we measure how much of something was traded at a specific price level. The VPOC identifies the price level where the most amount of buying and selling occurred. The VPOC forms and develops areas known as High Volume Nodes – price ranges that are powerful support and resistance zones. The current VPOC is right on top of two key support zones: the D leg of the Bullish Bat Pattern and the 78.6% Fibonacci level. Even if prices were to travel lower, there is another strong Fibonacci retracement level just below at the 88.6% level. Near term, support is strong and stable, but we should be cautious when trading cryptocurrencies, especially when transitioning into the weekend. Anomalous and violent moves can occur at any time.