Key Highlights For March 11, 2019
- The price of Ethereum (ETH) has been trading inside a descending wedge since Mar 5.
- There are resistance areas near $153 and $145.
- There is a support area near $126.
- MACD and SMAs triggered a signal on Mar 9.
- The price is trading inside a descending triangle.
Descending Resistance Line
The price of ETH on Bitfinex was analyzed at 30-minute intervals from Mar 5 to Mar 11.
On Mar 5, Ethereum’s price began to increase rapidly. It rose from around $130 throughout the early part of the day. By early Mar 6, ETH reached a daily high of $143.83—the highest price during the last week.
Prices began to decrease slowly. Several market cycles were completed between Mar 4 and 11 with each rise subsequently lower than the last. This creates a series of descending highs which can be traced along a descending resistance line:
The dates in which the line was touched are :
- Mar 6
- Mar 7
- Mar 8
- Mar 9
The resistance line can act as a ceiling to price. It also traces the general trend for price during the period.
If price breaks this ceiling for a significant period, rapid prices are likely to follow. Currently, the price of ETH is descending at around the same rate projected by the resistance line. Prices may continue to decrease following this line.
Longitudinal losses for ETH may be a market response to the rapid gains earned between Mar 5 and 6. It is unclear how long price decreases might last.
After reaching the Mar 6 high, a gradual decrease ensued. The price of ETH made a low of $131.0 on Mar 8.
Price often found support at the $135.8 level before bouncing back to the resistance line. Tracing these lows gives us a horizontal support line in the same way tracing the descending highs produced a resistance line.
The dates on which the line was touched are:
- Mar 5
- Mar 8
- Mar 11
The support line can act as a floor to price, preventing further downward movement. However, a breakdown below it could trigger a rapid downward move.
Breakdowns below the support line by a wick in a volatile market are relatively unimportant as long as they are not supported by continued breakdowns. In the case of the ETH, 30-minute lows rarely broke below support and were not supported by maintained losses.
The $135.8 level has been chosen as the most applicable one since it fueled the initial upward move on Mar 5 and it is the level at which the price closed on Mar 9. Therefore, it is the most revisited price level, serving as support.
The support and resistance lines combine to create a descending triangle, which is a bearish pattern, making a price decrease more likely. This suggests that prices may continue to decrease as predicted by the current trendline.
As prices continue to decrease, the price of ETH may continue trading within this triangle until a point of convergence between the resistance and support. At that time, the price will be forced to either break out of the resistance or breakdown beneath the support. With the current downward trend, a breakdown appears more likely.
Price increases are, thus, likely to continue occurring until they breakdown below the support. Price may continue dropping at the point, but a bounce-back is likely to ensue at some point.
Triggering a Signal
The moving average convergence divergence (MACD) is a trend indicator that shows the relationship between two moving averages (long and short-term) and the price. It is used to measure the strength of a move.
Combined with simple moving averages (SMA), MACD can be used as a trigger for buy and sell signals. Signals are triggered whenever the MACD line is above 0 and the price is above the 21 (red) and 50-period (green) SMAs.
On Mar 10, the price created several bearish candles which caused it to drop below the 21 and 50-period moving averages. During the same interval, the MACD line crossed below 0.
This movement would have triggered a sell signal, initiating that a downward trend may be starting. It would be invalidated by a price movement above the SMAs and a MACD line cross above 0.
Using these indicators, continued price decreases appear more likely.
Resistance and Support Areas
The price of ETH on Bitfinex was analyzed at two-hour intervals from Feb 14 to Mar 11 to determine possible resistance and support areas during a breakout/breakdown situation.
Resistance and support areas are formed when the price reaches a certain level several times. They can act as a ceiling/floor that prevents the price from moving further in that direction.
The closest resistance area is found near $144, with higher resistance found near $153. If the price were to break out of the triangle, these two would provide likely reversal areas. This means that a sudden reversal from the downward trend may lead to prices of $144 or $153.
However, a breakout remains less likely given our current analysis. A breakdown below the current support remains more likely. The closest support area is found near $127—which the value we might expect ETH to reach. A bounce-back may occur before this price is reached.
Summary of Analysis
Based on this analysis, a breakdown below the support appears more likely than a breakout above resistance. If the price of ETH breaks down from the triangle, such a prediction may be partially validated. If the price reaches the support area near $126, this prediction will be fully validated.
What do you think will happen to the price of ETH? Let us know in the comments below.
Disclaimer: This article is not trading advice and should not be construed as such. Always consult a trained financial professional before investing in cryptocurrencies, as the market is particularly volatile.