ETHUSD Update: Price action is consolidating within the 309 to 290 area and triangles like these are typically continuation patterns. Even though smaller time frames are showing some signs of reversal, the overall momentum is still bearish.'
When markets are in clear bullish trends, it is much easier to decide when to buy, but when the environment becomes conflicted and noisy, this is when you really need to understand price action. These environments are full of false signals and very easy to buy too early, especially if you have a limited understanding of TA.
Price action in this market has been behaving as anticipated around the projected support levels, but the reason why I won't start buying is because momentum has not changed. Lower highs often lead to lower lows and in the face of a small triangle, I would rather stay out until there is clear evidence of bullish momentum.
Remember a reversal does not guarantee price will go back up. The reversal is the first step that indicates momentum is in the process of changing. There are bullish reversals present on the 1 hour time frame but since we are facing a lower high, I need more confirmation and that will come in the form of resistance levels breaking. Strength breaks resistance levels and the price points that will confirm that bullish momentum is back is 310 and then the 320 to 330 area which is related to the .618 of the recent bearish swing. IF those levels are taken out, buying on pullbacks will be more reasonable. In fact a break above 330 will confirm the 290 area as a higher low which would signal further strength.
Since the market is still showing bearish momentum, the more likely scenario based on the clues on this chart, is a retest of the lower supports that I have been writing about which are the 291 to 282 area and the 260s. A break below 290 will more than likely trigger more selling and IF that happens, I will be watching these supports for stability before doing anything else.
In terms of Elliott Wave, this price action can be part of a subdegree Wave 2 of a broader Wave 3 (The previous 5 wave structure was the first wave). Corrective waves can be very confusing and for the sake of simplicity, I am not labeling them, but if this is a Wave 2, it only has two legs in place which means there is a greater chance of one more leg which is Wave C. If this wave unfolds, the 260 level is a very reasonable area for it to complete and there is even a possibility of a revisit to the 230s. If price actually retraces that far, that would be a good buying opportunity, especially for long term holders (Upon validation).
In summary, although some bullish signs have appeared at projected levels, bearish momentum is still present and the reason why I will not buy at the moment. The small consolidation, plus the wave count make for a situation that carries too much risk for any new long position. If the market proves otherwise, then breaks above 310 and 330 will signal that change and I will even consider buying a small position at that point. I am not trying to get the best price, I am trying to get in line with the momentum so that chances are the trade will go the right way with the least amount of pain. The market will decide and then I will adjust to the new information.
I've been having a look at BTCUSD for comparison. And what's interesting is the same bearish pennant pattern has formed there, as well as in many other cryptos (USD pairs). To me it is much clearer that Bitcoin is in the midst of an ABC correction than it is with Ethereum, where we are at the C leg of that correction. The Elliott Waves for Bitcoin seems to be much clearer with less noise. Given that Bitcoin tends to dictate broader movements in the crypto market, what do you think of the possibility of this ABC correction in Bitcoin (if it fully materializes) taking down the entire crypto market, including ETH?
@dalmazio, well yeah the BTCUSD chart is pretty clear and I notice the same tendency about Bitcoin being the overall leader. At the moment, the correction isn't anything major so I would need to see more serious levels get taken out. If Bitcoin gets hammered, I think it will certainly offer some good long term buying opportunities especially when everyone starting hating these coins.
lsemenenko
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I concur with most of the posters on here. I love your Technical Analysis and deep explanation. It's very helpful in understanding your thought process, which in turn helps attain knowledge from you much easier. I'm always waiting for your updates now. It's like opening a gift.
MarcPMarkets
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@lsemenenko, hehe opening a gift. I am glad my analysis gives you that feeling. I love opening gifts.
Aitoyko
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Thanks marc! Great writing as always.
MarcPMarkets
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@Aitoyko, you're welcome. Glad you are still finding my analysis helpful.
timter51
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Thoroughly enjoy your analysis @MarcPMarkets, great work.
Thank you for your kind effort on explaining things and share your ideas.
I agree with you that this is small reboud for a much more larger dip to come, not a very good entry point i think.
Additional observation, i noticed that on the BTC run from 3900 to 4700 (SEP6-8 2017 1 hour chart) there are 3 small new high at the 4620, 4680, 4700 and then major pullback as we already seen. These little 3 new high are an attemp to lure trader to open long position and get in BTC. The market-maker will push down the price so hard that trader at 4600 USD will be forced sales (which is around 3500 USD). This mean that ETH will also got an impact from this major dip as well.