Weekly Technical Analysis Of Ethereum

Ethereum has had a tough September, highlighted clearly last week which saw ETH-USD prices plummeting as low as $165 on the back of heavy selling. However, this marked an area where price action on the weekly chart had formed previous support in October 2017. This area also corresponds to a price area which falls on the lower channel trendline on the downward channel found on the weekly chart below.

ETH/USD Weekly Chart Showing Downward Channel: September 17, 2018

So what is the outlook for ETH/USD heading into the third week of September 2018?

Fundamental Outlook

The team behind Ethereum has been slow to release updates and partnerships through the last few months. The price, instead, has largely been determined by project owners selling excess ICO holdings converting ETH to fiat currency. That, combined with the downtrend of ICOs themselves, has been disastrous for price health.

Some of the “blame” (if you can call it that) for the recent fall in Ether prices may be assigned to the comments of Ethereum co-founder Vitalik Buterin, whose recent comments made in an interview with Bloomberg seem to suggest that he’s not very optimistic about the future growth potential of the industry.

Traders tend to read a lot of meaning into the comments made by founders of cryptocurrency tokens, and none more than Buterin himself. If there’s a perception of a lack of optimism about the price of a crypto in the market, this tends to lead to more selling and depressed prices.

Technical Outlook

The weekly chart for ETH/USD shows that the price action continues to move within the confines of the trendlines that form the lower and upper border. We see the descending trendline resistance line in red, and the blue support line below, forming the boundaries of price action. However, the support level has changed in the last week, with the bearish weekly candle falling all the way to the $165 price level, which was the support last seen in October 2017.

Ethereum Technical Analysis Resistance and Support levels

ETH/USD Weekly Chart: September 17, 2018

The horizontal resistance represents the last area of support which was taken out by last week’s candle. The descending trendline resistance has remained intact and continues to serve as long-term resistance for ETH/USD.

The candle for this week has opened on a bullish note, but it is still too early to indicate whether this bullish momentum will persist, or indeed what will happen to price action as the week wears on. All that can be assumed now is that the horizontal support is holding. We must however not forget the downward channel, whose lower channel line also has intersected the long-term support, reinforcing this level.

Ethereum Weekly Technical Analysis

So here are the trade scenarios.

Scenario 1

The price candle for the week has bounced off both the horizontal support and the lower channel line. It’s possible, therefore, that price action may continue on its bullish trajectory, in which case it will aim for either the next available horizontal resistance (previous support level at $290) or the upper channel line at a price level that may approach $340. The momentum for Ether is still very bearish. Therefore, traders who want to follow the trend should sell on rallies to the resistance areas marked above. The fact that the channel is pointing downwards already is indicating that the trend is down.

The behavior of the price bars/candles at the support/resistance areas is critical to any of the trade entries. Selling on rallies requires that the price candle hits the resistance areas without closing above them. Usually, the candle or bar will test the area several times in the course of the week before closing below the resistance line.

Scenario 2

The next scenario is expected to occur if the prices of Bitcoin retreat back toward the support levels, dragging other cryptos along with it. In this case, if Ethereum drops back to the support levels seen at either $190 (short-term support seen on the daily or hourly charts) or even back down to $165, it’s possible that the ETH/USD price may bounce from these levels. A bounce means that the weekly candle will touch those areas and start to move up again. Shorter time frame charts will show a series of candles which test the support area without closing below it. Those who want to follow the bounce (i.e. contrarian traders looking for short scalps, may decide to use long trades to follow these bounces to the defined resistance levels.

Market sentiment:

  • Long-term: bearish
  • Medium term: neutral
  • Short term: neutral

Points to Note:

Price moves on a weekly chart generally take time to evolve. A single candle forms in a week, and it may take several candles for price objectives to be attained. Patience in waiting out any of the possible price scenarios is a requirement for trading the weekly charts.

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Disclosure: I am/we are long ETH-USD.

Business relationship disclosure: This article was written in partnership with an analyst

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

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