Ethereum has had an amazing run after Bitcoin's recent dips, increasing by nearly 50% of its total price after dips from only a few weeks ago! However, it looks like indicators are starting to show some weakness for ETH in the short term on the 4-hour chart.
ETH now approaches its ascending channel's top (white line, note: linear is shown due to it being a short-term trend, but the trend looks similar on the longer-term logarithmic chart). As ETH approaches 3K, an almost perfect AB=CD pattern has formed indicating a potential bearish reversal for the short-term. This looks further confirmed by dwindling volume in addition to divergence forming against price on both MACD and OBV (red dashed lines).
However, with 3K being such a huge target for many ETH followers, there is always the possibility that FOMO kicks in causing an unexpected catapult upward. But in my opinion, the trend if heading downward from what I can see.
Hence, you should take the above solely as my opinion and not as financial advice. However, please also like or comment if you agree or see anything differently.
I am a beginner at this and the explanation of AB=CD mentioned "When the BC projection and the AB=CD completion converge closely and define a small area, the chance of a reversal increases". Does this mean the CD wave should be done within a smaller timeframe for AB=CD to be more likely, and if so the CD timeframe seem too long
crypto_trends
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@HZCryptonite, Great question! Hopefully the below explanation makes it clearer:
In short, when you find that the corresponding C point maps to a Fibonacci point of either 0.618 or 0.786, you will find that when you map the corresponding BC projection (in TradingView this can be done by using the Fibonacci Retracement tool, and starting at the B point, dragging the mouse further to the C point afterward), then you will then see that a projection is formed in the upward direction past 1 to near 1.272 and 1.618.
Hence, when the completion of the D point comes to completion close to one of these points (i.e., the BC projection points), then the closer it comes to this projection point, the more likely a reversal. Perhaps a better way to state this (from my thinking at least) is "the D point should map to the Fibonacci projection when using the B and C points".
I should note also, this is also fairly simpler in TradingView as the ABCD tool does this projection automatically for you such that you don't have to do the manual effort using the Fibonacci Retracement tool but can use the ABCD tool by itself and yield the same results.
I should note as well that the reciprocal relationship should match nicely as well, as my case above is not a perfect example here (since 0.618 is a better match for 1.618), however, the daily chart is a much better map for ETH (which I may write about later).
In case it helps as well, I have always found the wording on TradingView's website to be a little ambiguous and found that Scott M. Carney's books on "Harmonic Trading" to be a better start for an understanding.
I hope that helps you on your endeavors!
HZCryptonite
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@crypto_trends, thank you very much for the explanation. This clarifies!