ETHUSD Update: This market is consolidating within a triangle that is part of a bullish context. Typically these formations serve as trend continuation patterns and a subsequent upside breakout will signal the beginning of the next swing up toward the 250 to 280 resistance zone.
When I write "bullish context" I am referring to the fact that this market established a low (L) at 136, followed by a higher low (HL) at 187. The entire consolidation occurring at the moment is a higher low in my opinion. A strong market is one that is defined by higher lows and higher highs, and based on the current structure, a higher high is much more likely in the near future. In light of this price action, I anticipate the next upside break out will lead this market to the resistance zone of the 250 to 280 area which is relevant to the .618 of the most recent bearish swing.
When looking at this price action from the Elliot Wave perspective, it is within a Wave 1 of a large magnitude Wave 3. Within the Wave 1, we have established a subwave 1 and the current triangle can be counted as a subwave 2. According to the Wave Principle, wave 3 is never the shortest wave, which adds to the bullish argument significantly. A subwave 3 can take this market into the next resistance zone and beyond before consolidating again. Keep in mind a 5 wave completion at this degree will complete a Wave 1 of a large Wave 3. A large magnitude wave 3 can take this market beyond all time highs. Something to keep in mind in terms of holding for a broader move. A large magnitude wave 3 can happen over weeks to months. (See the evaluation referring to the Wave 2 bottom linked to this report).
A breakout is one tactic to consider within these market conditions. The other is a retracement to anticipated support levels to watch for bullish reversal signals. That is more my style and offers more attractive reward/risk. The 214 area which is the .382 of the recent upswing is still in play and the retest was met with buyers (see candle wick on this chart). This is a good area to look for reversals on smaller time frames such as the 1 hour or 15 minute. Reversal structures include double bottoms, higher lows or even candle reversal combinations like the harami or bullish engulfing. A break below this support can take price to the 183 to 169 support zone which is the .618 of the recent upswing. This is another area that offers attractive reward/risk.
To give you an idea of attractive reward/risk, IF I am buying around 214, and selling 1 unit at 241 and the rest around 260, my RR is around 1.5:1 on my first until and around 2:1 on my second unit. If price retraces into the 183 to 169 area, these ratios go up significantly assuming the same targets.
This evaluation is to provide an idea of what I am thinking as this market unfolds. Buying the next breakout is not a bad idea, but it is one that I tend to least favor and if I do buy into it, I buy 25% of my usual size in order to compensate for the less attractive RR. If price pushes above 243, that would signal a breakout buy for my trading plan. And my risk will be defined by the 214 area for stop placement.
This entire bullish scenario that I am sharing will be negated if price manages to break below 136. If price goes below 163 that will also be a significant sign of weakness, and call for further evaluation before taking any new positions.
In summary, this market is poised for an upswing which can take price into the 250 - 280 area and beyond. Triangles tend to act as trend continuation patterns and the current trend is bullish. My strategy for this market is to buy retracements that show reversal patterns and measure my risk using the current price structures in place. Breakout buying is aggressive in my opinion and I am willing to participate but with smaller size to compensate for the additional risk.
@MarcPMarkets I'm VERY new to this whole crypto trading and I actually understand (some) AND appreciate all your thorough explanations and thoughts BEHIND the chart! Thank you for taking the time. This one is one of the best explanations I've seen yet...PLEASE keep it up!
MarcPMarkets
⋅
@audiocande, thank you for the generous compliments. I'm glad my work is helping!
cryptofan07
⋅
I like your logical approach and experience is worth of learning from you. I wonder how this current market growth correlate with low trade volumes and why volume is low where is buyers? retrace scenariio is very possible if big money dont come in trade
MarcPMarkets
⋅
@cryptofan07, glad you can appreciate my logic. I suspect the low volume in this market is related to the lingering uncertainty about August 1st. Even though it is priced in, and out of the way in my opinion, there still seems to be some confusion about the event. Especially when Coinbase sends and email to all of its customers explaining how they are going to halt withdrawals during that time. Not the most encouraging message from one of the largest brokers. Plus, summer time in the US is a typical low volume time for other financial markets, and this market may be feeling some of that effect as well.
kali21
⋅
thanks for explaining things this is much more helpfull than just posting a chart
MarcPMarkets
⋅
@kali21, Glad you find it helpful K. I try to make my analysis as simple and clear as possible.
view_trade
⋅
Thank you for explaining your money management strategy; something a lot of other posts don't do!
MarcPMarkets
⋅
@view_trade, you're welcome. Money management is what determines profitability more than analysis. With good money management you can be wrong 60% of the time, and still be a profitable trader.
koreanlaundry
⋅
always love your analysis and charts, clear and concise and coincide a lot with my own perspectives, which add I guess a bit of confirmation bias for myself. Cheers!
MarcPMarkets
⋅
@koreanlaundry, hey K, glad to hear. It helps a lot when you are not alone in your thinking.