Will Ethereum’s Rally End at Resistance?

The tweet below was posted by cryptocurrency trader Dmitry Crypto, who suggests initiating a short for Ethereum at current prices.

$ETH #Ethereum

Don't short usually, but this looks too juicy to miss.

Thanks @TraderEscobar for the find. pic.twitter.com/Tv3EfY4ObA

— Dmitry 2.0 (@Dmitry_Dima) October 20, 2019

The trade in question has an entry point of $176, a stop loss of $179, and a target of $166. Let’s look at price movement closely and determine if this is an optimal trade to initiate at the current time.

Ethereum’s Short-Term Channel

Since October 10, Ethereum has been trading inside of a descending channel. At the time of writing, the Ethreum price was trading right on the resistance line of this pattern. Also, the 100- and 200- period MAs have made a bearish cross. The 200-period MA previously served as support and has been very reactive to price movement. It currently is at $180, so that may be an optimal place to put a stop loss — instead of $179, as suggested in the tweet.

Long-Term Wedge

However, looking at the longer-term, we can see that Ethereum has been trading inside of a descending wedge since June 26. At the time of writing, it was also at the resistance line of this wedge. Additionally, the 100- and 200-day MAs have made a bearish cross and are offering resistance to the price. Since both resistance lines coincide with each other, a much more profitable trade can be initiated using the descending wedge. An entry point of $177 with a stop loss at $181.5 and a target around $140 would give a nearly 10:1 R:R ratio, as opposed to the 3:1 in the descending channel. While we are not recommending that a short be initiated, in this case, the R:R using the long-term pattern is much larger than using the short-term one — even if the stop losses are placed at very similar levels. Do you think Ethereum will increase above $180? Let us know in the comments below. 

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[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.]