ETHUSD: Consolidation Breakout And New Levels To Buy.

2018年1月2日

ETHUSD update: New highs made as price touches 890 which should not be too surprising since there is a double bottom and higher low formation off the 647 area. This report will highlight what is reasonable to expect from here.

The 814 level is a previously projected target where price basically peaked at the height of the BTC rally. Since then, it has retraced and consolidated, JUST LIKE BTC is doing at the moment. Consolidations are just another word for triangles and triangles are trend continuation patterns. The trend was never bearish. Price is now fluctuating in this area again which offers an opportunity to lock in some profit for swing trade longs. This is a best practice. It reduces risk and allows you to capitalize on the herd while they are buying.

Buying now would be a bad idea even though it may look attractive since the "verticalness" is returning. The risk of retrace increases, and that is why it is better to lock some profit it and then hold on to some to see IF the market will continue higher to the next extension target levels.

944 is the upper boundary of the reversal zone where price can fail and retrace back to a newly relevant support level. 975 is the 1.618 extension projected from the 647 low which overlaps a previous extension measured weeks earlier. This is the range where price is more likely to put in a dramatic peak as the market unfolds and provides a reasonable estimate of where to measure reward potential from.

As far as the potential retrace, the 735 level is the .382 of the recent bullish structure which is now the nearest relevant support. If price decides to break lower, the 639 to 574 area would be the range to watch since it is the .618 area of the recent bullish structure.

If price cannot maintain the current breakout momentum, it will more than likely retest the middle of the range which makes the 735 area more attractive in terms of looking for a reversal structure to go long. I have previously written that the middle of ranges are where price action is more random, but IF price is coming off of a high, that is a different scenario and serves as an exception.

In summary, the breakout to 890 is a heads up that this market may be setting up for a broader rally. As a swing trader, I want to be long, but not at highs. The next retrace will at least provide a better level to measure risk from, whether it is 735 or higher. The objective is now to wait for price action to unfold in a reversal pattern where risk is more attractive relative to the potential reward levels currently in place. If price falls through 735 without finding support, then the current move will be a false breakout and at that point is more likely to retest the low of the range since this is where the herd panics. Either way If I am going to buy, it has to be based on my plan which minimizes the kind of bad habits that have been reinforced in this recently unrealistic trading environment.

Comments and questions welcome.