Ethereum (ETH) is forming an M-top. End of upward trend?
ETHUSD, 1D, BTSE
Since the last article, Ethereum (ETH) is up ~57% from $161.46. Within the last week, Ethereum peaked at $288.99, retraced down, and bounced to a lower high; laying out the framework for an M-top. This formation typically signifies an end to an upward trend. However, the M-top has yet to be confirmed. For the M-top to be confirmed, price would have to close below the reaction low. Support could prevent this formation; however, all indicators are looking bearish.
Ethereum's (ETH) M-top formation and breakout.
Ethereum (ETH) retraced from a peak of $288.99 (the first step for the M-top) to a low of $238.75 in just one day (the second step). This low is where I have plotted the breakout line (horizontal red). The breakout line can also be plotted at the close of this candle (i.e., $259.64), but the price is already below this area. Hence, I plotted a more conservative breakout line at the low. After the reaction low, price bounced back up towards the upper Bollinger Band (BB), but did not make a higher high and closed within the upper band (third step). Then prices fell back down. Should price close below $259.64, then I expect price to test the low of $238.75. However, there are levels of support that Ethereum will face before reaching these prices ranges. Despite this, if the price closes below the breakout line (final step and confirmation of M-top), the breakdown target would be $217.95 (i.e., -20.8%).
You might notice that the 23.6% Fibonacci line is only $10 above the low mentioned above. This indicates that Ethereum's (ETH) price has some sort of support before reaching the low. Although, it could be drawn in a better place, such as $242.41; the average of the three lows. The Fibonacci line is considered a solid area of support given that three candles have already approached it and closed above. Given this, there is a possibility that this area of support holds and prevents the formation of the M-top. Should this happen, Ethereum could look at a continuation of the uptrend. However, keep in mind that the price is already below the close of the middle of the M.
Bollinger Bands (BB), Moving Averages (MA), and Exponential Moving Average (EMA)
Across the last couple weeks, Ethereum (ETH) has been riding the upper BB before hitting a peak and setting up an M-top formation. Ethereum's price is currently below the 10-day EMA (blue; $257.08), signifying that prices may continue to lower with resistance at the EMA line. Price is likely to continue to approach the 20-day MA (red) at $235.55. On February 9th and 15th, Ethereum had a couple of golden crosses (i.e., respectively, 50- and 100-day MA, orange and yellow; and, 50- and 200-day MA, orange and green). However, the 50-, 100-, and 200-day MA's are to far away to be of relevance in the current environment. More focus should be placed on how the 20-day MA and the role it will play as price approaches it.
Bollinger Bands, Moving Averages, and Exponential Moving Average.
The MACD is looking very bearish, given the MACD line (blue) is currently crossing the signal line (red). However, both are above the zero line, so Ethereum (ETH) has that going for it. Despite this, at the close of the day, if the MACD line stays crossed past the signal line, I expect increased downward momentum in price.
Chaikin Money Flow (CMF)
The CMF is also forming an M like shape and has made a lower high. The CMF line is currently pointing downwards, however, it has yet to make a lower low. Considered with the MACD, the CMF is also looking bearish for Ethereum (ETH).
On Balance Volume (OBV)
Again, a similar M-top formation, but this one is complete with both a lower high and lower low. This is also looking very bearish. The OBV is breaking the upward trend and if it remains like this by the of day, Ethereum's (ETH) price will likely continue downwards.
Taking everything into account, Ethereum (ETH) is looking quite bearish. However, there are still a few hours before the day closes. If price stays below the 10-day EMA and/or below February 16th's low of $238.75, I expect continued downward momentum. If this happens, I expect all indicators (i.e., MACD, CMF, and OBV) to turn even more bearish than they already are. Additionally, price will have to reach $259.64 for the M-top to be confirmed. Once confirmed, I expect a ~20% price drop to a target price of $217.95. Despite this, Ethereum has the 20-day MA and the 23.6% Fibonacci level to act as support in the price ranges between $235.55 - $248.31, respectively. Although I doubt these are enough support, Ethereum also has the lower Fibonacci level as support (38.2%; $223.14). Should support hold, there could be a continuation in the upward trend. I am curious to see how Ethereum will act in the next few days.
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