Crypto Trading Analysis: Ether (ETH/USD) Completes A Bearish Head And Shoulders Pattern

Nothing in this article is to be construed as investment advice. Neither the author nor the publication takes any responsibility or liability for any investments, profits or losses you may incur as a result of this information.

Ethereum may dip considerably against USD in the short-term after indicating a bearish head and shoulder pattern (H&S).

What Are Head And Shoulder Patterns?

H&S trading patterns are typically characterised by 3 bullish peaks – the left shoulder, head and right shoulder, along with a supporting neck-line that rests at the base of the pattern.

The left shoulder represents the top of the opening bull run, followed by a second larger uptrend which forms the head of the pattern. After a heavy sell off, the right shoulder spikes around the same height as the first shoulder, as buyers attempt to push the price back up for a third time.

Once the right shoulder falls back onto the neck line, it is clear that the bulls have lost their momentum against the bear market which subsequently completes the pattern.

A complete H&S pattern is a strong indicator of a bullish reversal and usually a rapid decline in price is to be expected.

The chart above shows a clear entry point at $680 and once the pattern is completed, Ethereum’s price continued to fall below the $565 and $480 support levels.

As the bear market progresses, Ethereum is edging ever-closer towards the psychological $400 support level. We could see buyers sentiment improving here and witness a price rebound but should ETH break below this key level, the next supports are likely to be way down around $340.

Looking at the Fibonacci Retracement indicator, the hard bottom of this chart is set around $220 if confidence completely departs from Ethereum. 
A retracement to 0.786 fib level will be vital to restore faith back into the asset.

It’s also worth noting that the 50EMA line (blue) is beginning to cross below the 200EMA line (red) which is another strong indication of a likely fall in price.

What is An EMA?

An EMA stands for ‘Exponential Moving Average’. It is a moving average of whatever number of candles you set it at. A 50/200EMA is one of the more commonly used EMA pairings because it shows strong price movements when the two lines cross – these moments are widely regarded as ‘Golden cross’ and ‘Death cross’ moments.

The 50EMA is a moving average of 50 candles which tracks much closer to the general trend than the slower moving 200EMA. A cross down between the 50EMA and 200EMA is a ‘Death cross’, and represents a considerable loss of trading momentum as we can see in the chart above. Not all crossovers are definitive buy/sell indicators and sometimes the two EMA’s can frequently oscillate as momentum swings between the buyers and sellers.

ETH Price Prediction

At the time of writing, ETH has fallen by -8.71% with a relatively low trading volume of $1,500,000,000. With the price looming so close to $400 it will be difficult for traders not to panic sell in anticipation of a further collapse should the price dip further. That isn’t to say that Ethereum will not recover, the platform is still the #2 cryptocurrency by market capital and we often see assets rebound stronger after plummeting below key levels.

It will all depend on how well the market can hold its nerve and how Bitcoin responds in the near future.

Source: Read Full Article