Ethereum Price Analysis 5–25–2018

Source: The Merkle; Disclaimer for this article: This is not investment advice, I do not own any $ETH, nor have I ever and do not plan on doing so in the next few weeks at least. No one/entity/company/corporation paid me crypto/dollars/assets/favors or any other liquifiable asset/currency to write this article and I am neither profiting directly or indirectly from its curation. This article was not written under duress/pressure/threat/extortion or any other unfavorable condition either. I also do not possess any coins from a direct or indirect competitor of $ETH and have no tied interest to the success/failure of this project.

As mentioned prior in the price analysis posted on May 19th, 2018

View story at Medium.com

The likely path of Ethereum in the near future will be to continue its appreciation against Bitcoin.

From first glance, it appears as though the market analysis were completely wrong. However, I stick by the original statements that were made about Ethereum’s eventual appreciation against $BTC, regardless of $BTC’s USD price declines.

More about this will be explained in the coming marketing report (see the Twitter/Telegram for information), but let’s take a look at some of the recent price action for Ethereum first:

Marking #1 — The Sustained Uptrend

It appears as though the price was riding on a solid uptrend from April 3rd (where the double-bottom was first spotted) all the way up to May 20th.

This trendline can be considered very valid as it was very tested over the period of time that it was in effect.

In the above picture, all of the golden circles and the gold square indicate the places where the trendline was tested.

However, we saw the price ($ETH / $BTC) fall below the trendline on May 20th.

The volume tells another story as well.

The yellow curve tracks the volume from May 20th to May 22nd.

As you can see the volume has steadily increased over the period of selling until it reached a ‘high’ at the very end.

This, as observed before with the volume studies posted in the Telegram, is a direct indication of ‘panic selling’.

Source: http://www.pring.com/articles/article15.htm

Above is a tracking of the volume from May 7th to May 24th.

The periods are marked by the spikes in sell volume

Marking #2 — Measured Move Down

This pattern that Ethereum went under when the price did decline and break under that trendline is called a ‘measured move down’. Below is a picture of what that pattern looks like.
Source: http://forextraininggroup.com/trading-bullish-bearish-measured-move-patterns/

This is the potential result that can occur:

Source: https://excellenceassured.com/wp-content/uploads/2016/06/ABC-Correction-1.png

Marking #3 — Diamond Bottom Pattern

What has occurred recently with the 3rd marking (shown above originally and reposted below for convenience) is that a diamond bottom pattern has been formed:

Although this is a shoddily drawn diamond-bottom, the gist of it is still there (at least what’s relevant to confirm the pattern itself)

Take a look at a copy of how the pattern actually works below:

Source: https://tradingsim.com/blog/diamond-chart-formation/

From what we can see in the chart above, the diamond chart pattern is something that can be confirmed by Ethereum’s price action.

Now let’s look forward here:

  1. Golden Cross (EMA 50>200) had occurred on the daily TF on May 4th, 2018. This is something that’s commonly been seen as a major bullish signal.
Source: https://www.investopedia.com/terms/g/goldencross.asp

2. We can see that the price bounced off of the EMA-50 (golden line) and then reversed into a green doji*

Source: https://www.investopedia.com/articles/active-trading/011415/strategies-applications-behind-50day-ema.asp

CM Super Guppy

Ichimoku Cloud

The Ichimoku Cloud tells us a few things that are of note:

1. The candles here broke north of the cloud for the Ichimoku Cloud, which is always a bullish sign. So, that Ichimoku Cloud went from being a point of resistance, to a point of support.

2. The price fell below the Conversion Line (Blue), which is a major bearish sign. However, the price appears to be on its way to recovery while finding support on the base line (red line). It can actually be seen that the price appears to be caught between the conversion and the base line at this point in time.

3. The cloud has turned green, which indicates that the prior price movement has rendered a bullish prediction for the Ichimoku. This is its predictive ‘feature’, if you will.

VPVR

The outline on this chart speaks for itself at this point. Take it for what it is.

Volume Analysis

We did a bit of a volume analysis above. However, this is a bit more comprehensive of a volume analysis that looks further back than the month of May.

Potential Chart Formation Taking a Grip Over Ethereum

I see a bull pennant in the smaller scheme of this 2-Week Chart and in the larger scheme, a potential flat top forming

Okay, so let’s start looking at the momentum indicators on this chart.

Relative Strength Index (RSI)

Below is an explainer of what you’re seeing on this chart:

Prices can remain overbought or oversold for as long as they need be. It’s a bit harder to catch exhaustion at the earliest possible moment (unless you have a momentum indicator applied to the RSI to observe its momentum) because RSI is range-bounded (0 to 100).

Also, the data is a bit hard to interpret at times due to the fluctuations in values presented, so an MA indicator was applied to the RSI in order to give secondary confirmation results on the movement of RSI as a standalone indicator.

The blue line = EMA(9)[RSI(14)]

The pink line = RSI(14)

RSI(14)>EMA(9)[RSI(14)] = buy signal

EMA(9)[RSI(14)]>RSI(14) = sell signal

Currently, There’s a Clear Sell Signal in Place.

So that means we need to sell, right?

Well, let’s look at the RSI on lower TF.

1-Hour:

2-Hour:

3-Hour:

4-Hour:

5-Hour:

6-Hour:

What to Make of This RSI Data?

There could be a tangible change in trend that has not yet been reflected in the higher TF such as the 12H and the 1D.

Rate of Change (RoC) of the Relative Strength Index

The benefits of the Rate of Change indicator here (applied to RSI) is that it allows us to see the rate of increase or decrease in the RSI on a 5 period over 5 period basis.

The periods are intentionally framed to be tight (only 5 periods) in order to truck some of them ore micro-fluctuations that may occur.

The rate of change is that blue line. This is the Rate of Change(5): RSI(14), so it measures the Rate of Change (momentum) of the RSI(14), which, in itself, is already a momentum indicator.

The purpose of this is to give me information about whether the direction of RSI(14) is going to continue without me having to visually see it start waning on the charts. Very useful.

The yellow line is this value above smoothed over with the EMA(9). So, the formula for that line is: EMA(9): RoC(5)[RSI(14)]

EMA(9):RoC(5)[RSI(14)]> RoC(5)[RSI(14)] = Sell Signal

RoC(5)[RSI(14)] > EMA(9):RoC(5)[RSI(14)] = Buy Signal

So, What Does the Chart Above Tell Us?

Currently, the RoC(5)[RSI(14)] is reflecting a strong negative bias in the rate of increase of the RSI on the 1D chart. However, we can see a bit of a pivot in the last day or so.

However, what’s interesting is the difference in the values that we read across multiple time frames.

1-Hour:

2-Hours:

12-Hours:

The Rate of Change is soaring on the 12-Hour Chart, yet is ambivalent on the 1-Hour Chart.

Looks like this could be due for a reversal of fortune soon as well.

Stochastic RSI

%K>%D (blue>orange) = bullish. Still oversold, headed upward though.

Picture + caption speaks for itself. Not too much to say here apart from that. This indicator is still ambivalent at this point — not too much that we can make of it in the grand scheme.

Conclusion

That concludes the Ethereum analysis. I know — it’s a lot to swallow and you may be reading through it like, “This is a shitload of information, but what do I make of all of it?”

Let me try to synthesize the main points for you here.

1. Ethereum was soaring in value ($BTC pairing) from the beginning of May to May 20th.

2. The selloff was slow at first and then it gradually got heavier and heavier. This indicates that people essentially began panicking the longer that Ethereum dropped in price. This is matching how a lot of the market has been reacting to downtrends in price. It starts off slow, then it starts to accelerate over time (daily chart — not the hourly).

3. It appears as though Ethereum has gotten back on track though and the sell-off has eased up. The Diamond Bottom Formation (reversal pattern) showed up and was confirmed (see above & visit the link I posted for more information).

4. Please keep in mind that this is only for $ETH / $BTC. So, there’s a very real possibility that ETH can LOSE value in USD while GAINING value in BTC. So, please pay close attention to this fact if you’re using any of this information (not financial advice) to help guide your decision making on which investment strategy you want to apply to ETH. If you’re a BTC maximalist, this could be a great “safe haven” for you to increase the amount of $BTC you have.

If you’re looking for an investment that’s going to ultimately net you more $$ in USD, I’m not sure if this is the best investment for you.

5. This price analysis is far from comprehensive. I didn’t even get a chance to get into all of the indicators that are not overlay patterns. So, that includes RSI, Stoch RSI, ATR, etc. I just didn’t want to drill this into the ground too much. I’ve posted a lot of articles about all of the indicators that I mentioned in the prior sentence as well as a guide on how to use those on TradingView. Check that out and start learning how to interpret your own charts!

PM me if you have any questions. I’m shitty at getting to PMs at times, but I promise you that I do genuinely try my best to get to them — even if it takes me a week.

I created that price analysis yesterday at some point so, let’s take a look at what values are on the chart at this very moment in time (earlier on May 25th, 2018).

So, no great difference in price at this point. The volume though is reflecting bear market trends on the 4H. It looks more bull market on the 1D

Short Teaching on the Difference of Time Frames

I use the 1D charts for the bigger coins like $BTC and $ETH because they help us make inferences further into the future.

A general rule of thumb when it comes to charting is:

The higher the time frame the more substantial the indicator/pattern.

So, a double-top (confirmed) on the daily is going to hold WAY more weight than a confirmed double-top on a 1-hour/2-hour chart.

It’s important to make sure that you’re really taking note of the chart time frame that your chart is on and tempering your expectations of future price movement to that chart.

More than likely, you’re not going to be making any overarching predictions about price a week in advance from the 2H time chart. However, you can do so with the daily chart.

If you’re looking at a massive chart like Bitcoin, there are things that are on the weekly chart that may give you greater insight to future price movement a month from now.

The same applies for RSI and other momentum indicators. Divergence on the daily chart is a LOT more significant than divergence on the 1H chart in terms of substantive, sustained price movement.

In my opinion, if you’re a risk-averse investor, you want to go with higher TF charts. If you’re someone that wants to scalp trade and get in and out of positions within a 24-hour time frame, then a 4H chart is what I find to be most optimal. Anything lower than an hour is somewhat of a crapshoot when it comes to crypto. I know there are a lot of traders that do that and have some level of success with it, but that’s something that you need to be really attuned to in order to really master it to a worthwhile level.

Some Advice on Charting in General

When it comes to charting, my best advice is to GOOGLE and go to reliable sources. All of the things that we’re talking about like divergence, RSI, chart patterns, etc. are concepts that have been shelled out in trading theory years and decades prior.

Most of this stuff is very digestible when you sit down and read it. Investopedia, stockcharts, and so many other websites out there are really great resources for folks that are trying to learn how to chart, do TA, etc. They will give you a lot of information that traders out there (including myself) may neglect to give you.

If you follow that stuff by the book, you will be successful. Trust me. Don’t let people tell you that myth of “Oh, this is crypto — the normal rules don’t apply.”

They do. People don’t follow them and get screwed. I bet if you go on TradingView right now, you’ll see dozens of charts with inaccurate readings, trendlines that have been drawn incorrectly, etc. and it leads to poor inferences and subsequently wrong analysis.

TA works. We literally have living proof that TA works. Study this stuff and get it down to a science + study GOOD portfolio management strategy to minimize your losses and you will make a killing, trust me.

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