Volatility Returning To Ethereum?(Price Analysis for ETH: March 14)

In our Mar 13 analysis of Ethereum, we predicted that the price would decrease with prices below $134 being possible. Since then, there has been minimal price movement and the price has been trading near $134. Based on today’s analysis, we believe that Ethereum’s price will soon begin to increase. It is unlikely that prices will reach levels below $134 in the near future.

Key Highlights For March 14

• The price of Ethereum (ETH) has been on a downward trend since Mar 6.
• It has been trading inside a 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 one-hour intervals from Mar 6 to Mar 14. On Mar 6, the price of ETH reached a high of $143.83 which was the highest price recorded during the week. Prices began to decrease slowly. Several market cycles were completed between Mar 4 and 14 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. Initially, the price of ETH decreased at the same rate as predicted by the price, but the rate of decrease has intensified since Mar 12. 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.

Descending Channel

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 limits of the price, 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, one-hour lows rarely broke below support and were not supported by maintained losses. The support and resistance lines combine to create a parallel descending channel which is considered a neutral pattern. Since the channel is trending downward, price decreases can be expected. However, the current channel does not help us in determining whether a downward move to support or an upward move to resistance is more likely. Therefore, a shorter analysis of the time period highlighted above is necessary.

Symmetrical Triangle

The price of ETH on Bitfinex was analyzed at 15-minute intervals from Mar 12 to Mar 14. 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. The price made a low of $132.82 on Mar 12. It has made higher lows since. Tracing these lows gives us the ascending support line. Similarly, the price made a high of $137.5 on Mar 12, It has made lower highs since. Tracing these highs gives us the descending resistance line. Together, they trace a symmetrical triangle with a point of convergence appearing likely within the next day. At this point, the price will either breakdown below support—meaning likely prices losses—or a breakout above the resistance—meaning likely price gains On Mar 12, the price closed at $134.05. At the time of writing, it has reached the same level three times. However, during the same interval, the MACD and RSI have made the first low and continued to make higher lows. This is called bullish divergence and often precedes increases in price—meaning a breakout at the point of convergence may be more likely than a breakdown below support. The might invalidate the projection of continued price decreases as suggested by the resistance line alone. Using these indicators, it is likely that the price eventually launches an upward move above the resistance line of the triangle.

Resistance and Support Areas

The price of ETH on Bitfinex was analyzed at two-hour intervals from Feb 24 to Mar 14 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. 

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, an upward move towards the resistance line should come before it. If the price touches the resistance line,  the prediction will be partially validated. If a breakout from the channel occurs, it will fully validate the prediction. A breakdown with prices dropping below $134 would invalidate the prediction. What do you think will happen to the price of ETH? 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.