Chartpunk Ethereum Brief #4
Ethereum is currently the mostly used smart contract platform out there, built on a decentralized, open source blockchain. The project has launched in 2015 and is today the second biggest blockchain platform by market capitalization. In this brief I will provide you with periodic technical analysis updates on Ether, the native cryptocurrency of the Ethereum blockchain.
HTF Market Structure
The high time frame Ethereum market structure is bullish. The price of $ETH is trending comfortably within the lower band of the ascending channel that is drawn from the 2020 March crash.
The 3-day stochastic RSI of Ethereum has just returned from oversold territory. The flash crash has resulted in a potential crossing down, bulls need this indicator to continue trending upwards instead of turning around.
Zooming in on the daily chart we can see how nicely the AVWAP levels of the July uptrend have held the price during the Friday flash crash. The AVWAP level currently around 3400 is nicely serving as ultimate support for the bull market, and the price is also holding the AVWAP level of the October push, currently providing support at 4070.
If we evaluate the moving averages we can see that the 128-day MA served as support during the flash crash, and currently the price is trying to climb back above the 4300–4350 confluence zone of the 50-day MA and 20-day MA. Flipping of these MA levels into support would be very positive for the bulls.
The Relative Strength Index (RSI) on the daily Ethereum chart is closing in on the descending trendline, a possible break could result in a bullish momentum.
LTF Market Structure
The low time frame 4-hour chart is showing us that the AVWAP support at around 4070 is holding the price nicely, and the bulls are currently making an attempt to take over the AVWAP confluence zone of 4220–4310 which is comprised of key AVWAP levels of the pullback that has started in November. A successful flip of this zone into support would strongly assist the bulls in ending the low time frame downtrend of mid-November.
As we can see, the Ethereum chart is in a much better shape than that of Bitcoin. The high time frame market structure has remained bullish, key support levels have been nicely held during the flash crash. Confident price action above 4300–4350 would return this asset into full-bullish mode.
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What is trend trading?
Trend trading is a market strategy that is reasonably different from swing trading or day-trading. A market “trend” is a tendency of a financial market price to move in a particular direction over time. Swing traders and day-traders are usually trying to pinpoint low-term market tops and bottoms, and take aggressive positions expecting to profit from a swift change of market direction. Trend traders are looking for consolidated and strong directions on a given market, and are trying to ride the trend for as long as possible. These traders normally enter in the market after the trend “properly” establishes itself. My core strategy in trend trading is to look for a market setup where the long time frame market structure is indicating a solid trend, and intact price action is supported properly by the low time frame charts.
What are my key indicators?
I am using trendlines, channels and moving averages to identify market structure and to spot trends. In crypto trading my core moving average indicators are the 50 and 128 daily moving averages. I am also using anchored volume weighted average price (AVWAP) analysis to identify support/resistance levels.
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