Ethereum Prices Trade at Support Levels after Tricky Waters

Journalist:
July 11, 2017

Ethereum prices have followed the trading pattern of nearly all digital currencies making highs in early June above $400 per coin.  The chart below shows the trading action after the high was established and the measured pullback which is now in progress.  It is absolutely an acceptable expectation that the Ethereum coin has a pullback under $200.

30-day Ethereum Price chart from Poloniex.

They went up too fast (everyone knows this) and the natural forces of supply and demand are moving prices.  Technical patterns always explain where prices are going, and it does not matter if we are following IBM during earnings season, or soybeans in a summer drought.  I don’t care what asset it is (often I would rather not know any fundamentals), the technical signals are more reliable than any fundamental metric. During times of volatility it becomes the only handle you can latch onto during a rumbling earthquake.  Let’s look at Ether and get our hands around the valuations as we see them.

The math goes like this, the rally started in February at around $18 per coin, and prices skyrocketed to $408 adding deep liquidity and essentially creating an alternative to bitcoin. Volume exploded into the highs (logical) and Ether was a media cycle darling. Investors flocked to Ether, and many exited a portion of their Bitcoin as a diversification move ( I did this ) around $50, and watched all currencies rally.  Once the mad rush was over you had an orderly sell off (liquidation) where those who had a profit took money off the table.  Most of the public is long Ether above $300, so when they started to sell off they spent the coins or exited (weak hands) the investment.  Prices traded down to $238 in the first drive lower, then rallied quickly to $350+ pulling in those who were looking for an extended rally.  Prices are testing the support levels of the move from $18 to $408.  This support number is $166. If you look at where the decline stopped in Ether it is $170 so the entire move from February is an orderly decline after the rally.

I fully expect the support levels to hold and expect Ether to trade back to $220 shortly, and then retest $310.  Multiple closes below $165 signal a different story, and this does not mean sell if you have a few trades below $170, this means if I see price action and huge volume below the $165 level in Ether coins they would likely trade under $100, but for now they should be traded from the long side as they continue an orderly decline from the $408 high.

I hope that is not too confusing.  Conclusion here is 1.) support held, 2.) Ether should trade higher after the concerns about the Bitcoin fork subside, 3.) digital currencies are the fastest game in town, and you need a handle to grab on to during the earthquake.

Reviewing technical analysis during volatile moves is the only way to trade volatile assets, internet stocks, soybeans in a drought, or declining real estate prices all have levels of support, you know this instinctively, and if you are trading any digital coin, get a sense of a valuation using technical support and resistance.  It will always be about the math.

Featured image from Shutterstock.

Steve Kanaval

Steve began his career at the Chicago Mercantile Exchange in 1980 and ran Morgan Stanley Derivative Prop Trading for the firm. He continued his career as a Trader/Portfolio Manager for multiple Hedge Funds during the Internet Boom of the 90's. Steve is known as an expert in trading stocks and digital currency and has published thousands of articles and archived video with important market participants related to US Equities, private shares and crypto currency. He offers a humorous, unique insight related to volatile stocks and the related back stories and drivers.