Ethereum made a high of $1417.96 on January 13 2018 and hit a lot of $565.53 on Feb 6, 2018. Price action for Ethereum can be described as operating in a for now. The main (over price highs) is drawn with its parallel used to connect price lows to form the channel.
The range for Support 1 is: $903.11 and $871
Range for Support 2: $787.17 and $753.28
If support 2 is overcome, then it is possible for bears to drive prices down to as far as the bottom of the channel which is ~ at $387.
The alternate scenario would involve the bulls breaking the . If this is the case, then price of Ethereum could reach as far as $1721. This target is calculated by taking a vertical measurement of the width of the channel and projecting it from the break out point above the
Possible Scenarios for Ethereum
(1) Bullish Scenario:
BUY when price breaks above the most recent high on Feb. 18, 2018 at ~983.31. Price break above the $983.31. Stop loss should be place just above the upper range of Support 1 (~$901). This then produces a risk of $983.31- $901.00 = $82.31
The vertical projection of the width of the channel added to the breakout point. Target is at ~$1721. Potential profit = $1721 – $983.31 = $737.69
Risk/Reward= $737.69 /$82.31 = ~9:1
(i) Bearish Scenario 1 (Most aggressive) : Selling as soon as price touches the top of the downtrend channel @~ $975.68. Stop loss will be above the channel.
A price move above 1126 can be used to invalidate this scenario.
Therefore Risk = $1126 – $975.68 = $150.32
Reward = 975.68 – $378 = $597.68
Risk/Reward= $597.68 /$150.32 = ~4:1
(ii) Bearish Scenario 2 (Slightly aggressive): This involves Selling as soon as the bottom range of Support 1 gives way. If this is the case, a protective SL can be placed at the high of the candle on Feb 18, 2018 (i.e. just over $983.31.
This therefore makes the risk on the trade $983.31 – $863.38 = $119.93
Potential profit = $863.38 – $387 = $476.38
Risk/Reward= $476.38/ $119.93 = ~4:1
(ii) Bearish Scenario 2 (Conservative): This involves Selling only when Support 2 is broken to the downside. If this is the case, a protective SL can be placed just above the top range of Support 2. If $789.31 is used in this case, Risk = $789.31 – $741.52 = $47.79
Potential Profit = $741.52 – $387 = $354.52
Risk/Reward= $354.52/$47.79 = ~7:1
P.S. The risk to reward ratios calculated above give an idea of the possible profitable trades for Ethereum based on the price channel. For the Bearish scenarios, the risk/reward ratio might have to be adjusted if you prefer to take profit into the 10 or 20% of reaching the bottom of the channel which I have put here as $387.