ETHUSD update: Price hesitates around 1000 which appears to be developing into a double top formation. Isn't this bearish? In this report I will evaluate the price action and consider what is more likely to follow based on market structure.
The price structure leading up to the 1K area is bullish and has not shown any signs of significant weakness yet. The potential double top at the moment does not carry much weight. Why? Markets that are going to retrace often reject resistance areas quickly upon a retest, not float around the highs. Based on this price action, this market is more likely to consolidate on a smaller time frame and break higher. Which is also another way of saying it is NOT a good time to short this market.
Based on the most recent pull back attempt, there is now a reversal zone boundary at the 1046 level. This means price can push slightly higher into new high territory and fail for a more significant retrace. This makes the area between current price and the 1045 area an attractive place to lock in some profit, and reduce risk. It is not an area to establish new swing trade or position trades long because the risk of retrace increases the higher it goes.
The 978 area which has seen some price gyration is also a notable level because it is a 1.618 extension projected from the 642 low. These levels are usually not precise, but offer a good area to estimate a general target when it comes to assessing reward vs. risk.
What all this means is this: To maximize your investment and your operations in this market, you need to at least have a sense of the time horizon for your position. If you are swing trading and bought in recently, this is an area to lock in profit to justify the risk taken, which means it is wiser to unload more of the position than less since the retrace risk is so high. If you are holding for longer term, and own from much lower prices, this also offers a chance to lock in some profit and reduce risk, but you have much more flexibility because a 20 to 30% retrace is much less threatening.
Without some sense to time horizon, you will be at the mercy of the market. Your greed and fear will govern your decision making and more than likely get you to buy at the high and sell at the low.
As far as buying goes, I am most interested in the retrace IF the market offers such an opportunity. The 881 level (.382 of recent bullish structure) is the first level I am watching for a possible bullish reversal. If price happens to retrace further, the 835 area (old resistance/new support) and the 788 to 724 zone (.618 of recent bullish structure) are the areas I will be watching for an attractive reward/risk opportunity as far as a swing trade goes.
In summary, a key concept to remember about technical analysis is this: it offers a framework to organize market information in a way that helps us uncover clues as to what the market is more likely to do in the near future. It offers a way to measure and compare the decisions of the crowd and use that information to develop potential scenarios that the market is more likely to follow. It does not mean the market WILL follow. It is up to us to adjust as new information becomes available. When a market is on it's highs, as a swing trader, that is a place for me to take some profit and reduce risk. I don't care if it goes higher without me. IF the market is nice enough to offer a more attractive opportunity by pulling back to a support, then I will be happy to look for a place to get long in the area. Having this decision making structure allows me to operate in ways that stack probabilities in my favor, and give me a better chance of a profitable outcome on a repetitive basis. Having the ability to extract smaller profits repetitively is much more valuable than a single home run.
I believe in everything your saying. But as a noob just getting into this stuff, it looks like to me their is a bigger player in the background pushing this higher at the moment. We're in the middle of a leg up and I think we're all missing it. Hopefully we get a retrace so us normal peasant folk can jump in... :(
f1dust
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@The_Dan1mal, whoever is the bigger player doesn't matter... it's the crowd who follows who pushes the market in whichever direction the bigger players lead.... like what Marc says, technical analysis is to give us clues where the market is heading... sometimes it is obvious, sometimes it is not.. if you have a fear of missing out, you'll need to deal with that fear whatever market you're trading, otherwise you'll fall victim sooner or later to the market...
My advise (as a not so new trader myself) is take time to learn TA, don't rush into these markets. A wise man once told me, the markets are always there, up or down, once we learn the skills to trade, we'll always make money because having the skills and the mental strength will tilt the odds in our favour :)
Happy trading! :D
vRaBBiTv
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@f1dust, Thanks for the advice f1! Your last bit on noting that "markets are always there" a great reminder. Plus, even if I hit some kind of lucky homerun (which I feel like I'm missing on ETH) I probably wouldn't have the wisdom currently to maintain or increase the position/capital. Better to learn slow and hard than rise fast and crash later.
lgcasperwhite
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@The_Dan1mal," normal peasant" you make my day....:):):):):):) I am not alone on that fucking peasant planet!!
zambrpa1
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Thank you Marc for being the voice of reason.
freezecz
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Hello, thanks for the analysis. How did you determine this price level: Based on the most recent pull back attempt, there is now a reversal zone boundary at the 1046 level.
satertrading
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I missed the radio show today; thanks for posting the podcast link.