On Mar 6, 2019, Ethereum (ETH) reached a high near $144. Subsequent price drops ensued. Ethereum continues to trade on a downward trend.
In our Mar 12 analysis of Ethereum, we predicted that the price would trade above $134 with a possible breakout in the next several days. This breakout has not yet occurred, but the price has been mostly trading above $134 as predicted—with the exception of a wick drop to $133.6 early on Mar 13.
Based on today’s analysis, we believe that Ethereum will eventually break out of this current trend. In the meantime, however, the price will likely continue trading inside a downward channel with gradual price losses possibly below the $134 range.
Key Highlights For March 13, 2019
- The price of Ethereum (ETH) has been on a downward trend since Mar 6.
- It has been trading inside a parallel descending channel.
- There are resistance areas near $153 and $145.
- There is a support area near $126.
- There has been bullish divergence developing.
Descending Resistance Line
The price of ETH on Bitfinex was analyzed at 30-minute intervals from Mar 6 to Mar 13.
On Mar 6, the price of ETH reached a high of $143.83 — the highest price recorded during the week. Prices began to decrease slowly. Several market cycles were completed between Mar 4 and 11 with each high being lower than the last.
This series of descending highs traces the descending resistance line—which also showcases the current downward trend of ETH’s price.
The resistance line can act as a ceiling to price. It should theoretically trace the upper limits of price over a period of time. It also showcases the overall trend for the price during the same period.
Wick breakouts such as the one on Mar 8 can be considered insignificant if not succeeded by sustained gains.
Following this high, the price of ETH returned to beneath the resistance line almost immediately. It has since followed the trend to its current levels of around $134.
The downward trend for ETH may be a market response to its prior rapid increases. The resistance line alone is not sufficient to determine how long these decreases may last. Based on this trend, ETH’s price is likely to continue decreasing at the rate projected by the line.
After reaching the Mar 6 high, a gradual decrease ensued. The price of ETH made a low of $131.0 on Mar 8. It made another low of $130.55 on Mar 12. Tracing the lines corresponding to the closing prices of those intervals gives us a descending support line.
The support line can act as a floor to price similarly to the way resistance acts as a ceiling. It theoretically traces the lower preventing further downward movement.
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 support and resistance lines combine to create a parallel descending channel—a generally neutral pattern. When the channel is trending downward, price decreases can be expected. This is the case with Ethereum.
End of The Downtrend?
Combining moving average convergence divergence (MACD) and relative strength index (RSI) bullish/bearish divergence with support/resistance essentially predicts price fluctuations.
The 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. The RSI is an indicator which calculates the size of the changes in price in order to determine oversold or overbought conditions in the market.
On Mar 11, the price reached a low. It made a lower low on Mar 12 at $130.55.
Similarly, the MACD and the RSI made lows on Mar 11. However, they continued to create higher lows on Mar 12.
This is known as bullish divergence and often precedes increases in price.
In the case of ETH, a price increase succeeded the divergence, but it was not substantial enough to suggest an immediate breakout above the resistance line. However, it does suggest a possible breakout in the less immediate future.
Using these indicators, the current downtrend may be nearing its end. After slightly more price losses, a breakout is expected in the near future.
Resistance and Support Areas
The price of ETH on Bitfinex was analyzed at two-hour intervals from Feb 19 to Mar 11 to determine possible resistance and support areas during a breakout/breakdown situation.
The first resistance area is located near $144, with the second being found near $153. If the price were to break out of the channel, these two would provide likely reversal areas. This means that a sudden breakout above the resistance line may lead to prices of $144 or $153.
The closest support area is found near $128. The price came very close to reaching this support on Mar 12 when it reached a low of $130.55. Prices may continue dropping toward these levels until a breakout brings levels closer to the resistance levels of $144 or $153.
Summary of Analysis
Based on this analysis, the price of ETH is likely to keep trading inside the channel. While a future breakout is likely, it is also possible that the price drops and validates the support line for the fourth time. If the price trades inside the channel with continued price decreases, the prediction would be partially validated. a breakout following price decrease would fully validate the prediction. A breakdown below support might invalidate the prediction through a subsequent reversal leading to a breakout would generate partial validation.
What do you think will happen to the price of ETH? Will it drop all the way to support or is a breakout coming? 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.