crypto strategy

November Technical Update on Ethereum

Avi Rosen

Produced with Ryan Wilday and Avi Gilburt

2022 has been a tough year for crypto investors. The past few months have had all the hallmarks of a bear market considering all the incredibly negative developments in the crypto space with several major bankruptcies in declining exchanges. Most recently, and perhaps the most significant (to date) was the demise of FTX (FTT-USD).

And while our larger, more immediate bullish thesis in Bitcoin (BTC-USD) certainly lost confidence due to the extended break below $24,000, Ethereum (ETH-USD) held more tightly to the broader expectations set out this spring. Let’s review:

From April 25 article: Ethereum: a technical approach for the next year:

“It does imply a substantial downside in this correction, but those prepared with cash would do well to view this as a good risk-to-reward buying opportunity, provided those investors are prepared for the noted probability of volatility.”

The price was trading around $2,950 at the time of writing and was eyeing a decline towards the $1,200-$1,700 region as a buying opportunity.

That said, when the article was written, we expected this pullback to be a wave 4 within a larger wave (3). Considering that the June low saw prices fall well below $1,200, or roughly $880 on exchanges, we are now looking to a bigger pullback for ETH. In other words, this pullback is considered a wave (4) rather than a 4 of (3).

Where does this place us in a larger context?

When the April article was written, it was noted that the price had formed 3 waves from the 2018 low, but that wave (3) was not over yet. Again, due to the depth of this pullback, the odds moved strongly towards all-time highs after ending wave (3).

All this to say that we still only have 3 waves from the 2018 low in an otherwise impulsive structure, so this strongly suggests that there is still a high to come. As long as price maintains support for a forward (4), this thesis is intact. More significant support for (4) is $787-$1,058, and so far we have a substantial bounce from this region. Also, if prices were to post lower lows than June, I might allow a test of the $660 region, but any significant break below would leave us with a reliable outlook for a higher in the wave (5). In other words, a significant or sustained break below $660 would likely crush our expectations for wave (5) higher.

In line with the broader bullish expectations, price formed a micro 5 wave rally from the June lows, providing the first potential indication of a wave (4) low. The subsequent retracement has gotten quite deep and, at the time of writing, is reasonably threatening to retest the June lows. To a lesser degree, as long as the price remains above $995-$1,000, expectations are for a follow-up to the upside. Should the price break $995 resoundingly, it is highly likely that the June low will be tested and likely broken.

Please note the fractal similarity (see charts below, especially circled sections), albeit on different scales from the move from the December 2018 low to the June 2019 high and subsequent return. Rallies and declines show a very similar wave structure as well as the depth of the (2)/2 wave. The March 2020 low also challenged the thesis of whether Ethereum would maintain a viable (1)-(2) at from the 2018 low.

What does it take to more confidently establish the bullish thesis?

Price needs an impulsive rally above the late October high to begin. Five waves up, first above $1,680 and then above $2,030 (August 2022 high) would be a very positive move towards a strong bull takeover.

The next step would be for the price structure to hold micro supports along the way and break above $3,000. Currently, if we have a bottom in place for wave 2, the 1.0-1.236 extension lies between $2,465 and $3,005. If ETH is to prove that it is heading for new highs, this region will obviously need to be taken over. That said, even in a very bullish scenario, it is likely that this region would reject the price on the first test from below. Once the price hits the August high, the relevant support will be around $1,750-$1,800. It is necessary for this region to contain any decline above $2,030 to maintain a confident bullish outlook.

Given the depth of this pullback into the 2022 low, our upside expectations have been muted somewhat. The minimum upside target – assuming conditions are met to hold wave (4) support – is $6,350. That said, cryptos tend (usually) to extend in their wave 5 so I can’t rule out a trip up to $16k.

Finally, given that the rebound from the November lows has been rather anemic so far, we would be remiss not to be on the lookout for future lower lows.

In the next few days, if the price breaks out of $1,000 and heads towards $660, even if this region holds, our confidence in price recovery to new all-time highs will be somewhat shaken. A rebound is expected from this region, but at this time I cannot rule out the possibility that such a rebound from $600 to $660 is only a corrective (B) before a much larger decline does not develop, as shown in purple.

ETH-USD weekly 2018-present

ETHUSD Weekly

Jason Appel (Crypto Waves)

ETH-USD 2018-2019 (1)-(2) Fractal

A pasted image

Jason Appel (Crypto Waves)

ETH-USD June 2022-November 2022 1-2 Fractal

A pasted image

Jason Appel (Crypto Waves)

#November #Technical #Update #Ethereum #crypto strategy

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