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Ethereum technical analysis for the week of Jan 18 2018

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 bear channel for now. The main trend line (over price highs) is drawn with its parallel used to connect price lows to form the channel.

Price action currently is close to a resistance area for the channel. The key areas to watch are Support 1 and Support 2 as drawn on the chart.

The range for Support 1 is: $903.11 and $871
Range for Support 2: $787.17 and $753.28

ETHereum.png

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 bear channel . 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 bear channel

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.

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