ETHUSD: Bearish Momentum Retesting Minor Supports. Buy Signal?

ETHUSD update: Minor support area near 1291 being tested while there is no significant reversal structure in sight. Based on the current price action, this retrace can be labeled as a sub wave 4 which implies one more attempt at the highs before a broader correction is reasonable to expect.

For those who are newer to utilizing TA, it is important to understand what is offers and what it doesn't. We are evaluating price action to get an estimate of what the market is more likely to do in the near future. It is also important to understand that TA is a process that assists with making more structured decisions when it comes to your trading strategy. It is NOT a strategy substitute. Many participants that are new to the world of speculation often think TA and trading strategy are the same process.

I emphasize this idea because this market is fluctuating around a level that offers some opportunity, but it depends on the scope of the strategy you are employing. The 1291 level is a minor support that is the .382 of the recent bullish swing measured from the 1069 low. In strong markets, supports often hold, but simply buying because price is at a projected level is not enough. This is where strategy comes in.

Based on my swing trade strategy, this level offers better reward/risk (especially compared to buying it at 1424). What is missing is the confirmation which I evaluate in the form of a reversal pattern such as a double bottom, failed low or pin bar (see example just above the 1069 support level). IF the market can construct a reversal in this area over the next day, then it would offer a chance for a swing trade aiming to capture the next leg up to test the 1540 resistance level (sub wave 5).

Otherwise, based on structure at the moment, price is poised to retest the 1206 to 1152 minor support zone which is the .618 area of the recent bullish swing. This zone along with the lower support levels like the 1069 area, or even the 872 to 739 zone offer more attractive opportunities for longer time horizon strategies such as position trades.

An important bearish sign to watch that implies the broader correction is in play is IF price breaks below the 1152 lower support boundary. IF that happens, it would be reasonable to expect a retest of the 1069 or lower which offers the opportunity to WAIT for a position trade once price reestablishes stability.

Often I will get questions about shorting when I write about lower price possibilities. The reward/risk was attractive for shorts at the time of writing, but there was no confirmation. Eventually a confirmation developed (break of spinning top low), but that is something you must recognize and be within the scope of your trading plan. I do not short these markets because I prefer not to trade on margin, but if I was playing the short side, it would be on much shorter time frames. I would rather take smaller profits and keep risk low on the short side of a bigger picture bullish market.

Another thing to keep in mind is IF this market can't build a reversal structure around the 1291 area, and retests the low 1200s, it will negate the smaller impulse wave. This implies the next attempt to retest the high (would be sub wave 5) will more likely unfold as a lower high which I would interpret as a very bearish sign.

In summary it is important to keep your evaluation and trade processes separate. TA offers a framework for price evaluation, while the trade process offers a framework to define reward/risk, entry/exit criteria and time horizon. Everything is an estimate, and it is our RESPONSIBILITY to adjust to the market as it CHANGES hence the use of the word "IF". TA helps to interpret these changes in a way that is relevant to market intentions, and not our thoughts or feelings. Buying a retrace in a strong market is a best practice, but it requires a more rigorous process in order to time that position in a more beneficial way relative to risk.

Questions and comments welcome.

評論:

Long 1311.65 (Coinbase) Stop 1243 Target 1395 RR: Aprrox. 1.3/1. This is a swing trade. Will write about it in today's report.