Fortunately, last night’s decision to buy bitcoin at around $658 turned out to be quite profitable, up around $30 in under a day. I have not closed that position as I expect that asset to go up quite a bit higher over the next two weeks.
Today I want to take another look at ethereum. We last looked at this asset two or three days ago. At that time price was sitting at the top of the square, and also right on the 1×2 Gann angle. I noted that it seemed to have strong support at that level. Because price was sitting exactly on support, I pointed out that this gave us the luxury of placing a very tight stop of just a couple of cents. We understood that if that 1st square support was broken by you just a few cents, there was a likelihood that price would fall significantly from there.
Let’s look at the daily chart since that time:
As you can see, price did indeed fall through support. Momentarily at least, the second arc of the pair provided support a little lower. However we should not get complacent and expect that price will stabilize here. Where is the support? It seems more likely that price will fall further, perhaps finding support at the 1×3 angle. As I have noted on the chart, this implies price falling at least as far as $10.30.
Opinions and strategies vary. Some more aggressive traders would probably consider shorting the coin here. I can’t argue with that strategy, although I personally would not do that without first consulting a bear setup of the chart. So let’s do that now:
This chart looks quite bearish frankly. There’s no clear support all the way down to the bottom of the 2nd square. That support is noted at just over $10. Ominously, 5th arc support is all the way down to just under $7.
Note that the spike low in early August was also in that $7 price range. Will price drop all the way down to seven dollars again? Perhaps ending a large A-B-C correction to the $21 high? Obviously, I have no way of knowing that today. However, if the third arc pair is broken that scenario would not surprise me.
Based on what we are seeing here, I sold my ethereum and bought litecoin with the proceeds. I am seriously considering taking a short position in ethereum at this point.
Remember: The author is a trader who is subject to all manner of error in judgement. Do your own research, and be prepared to take full responsibility for your own trades.
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