The first warning for the ETH Bulls will be on a daily close below $1720. Thus at this stage, according to the charts, chasing ETH for a run to $3000 and beyond may not be the best low-risk, high reward strategy.
In my previous article on Ethereum (ETH) from three weeks ago, I was “… looking for a somewhat tricky, whipsawing, move higher, ideally to around $1880+/-40, but it could even challenge the recent all-time high. From there, I expect several weeks of downside back to $1200+/100. After that, I anticipated the next rally to ~$3000+. However, a weekly close below $1200 targets $900…”
Fast forward, and ETH topped this week, so far, at $1891. Thus, using the Elliott Wave Principle (EWP) and Technical Analysis (TA) was once again a powerful way to forecast the price levels to be reached three weeks in advance. Therefore, it is time to become more cautious by, for example, raising stops, maybe take (partial profits), etc.
In this week’s update, I would like to look at the weekly and monthly charts to better understand ETH’s big picture potential (months to years out). See Figure 1 below.
Figure 1. ETH weekly and monthly charts with EWP count and technical indicators.
A retest of 1200+/-100 and then rally to new all-time highs.
As you can see, the weekly and monthly charts feature two different EWP wave-labels, but both point to higher prices (anticipated paths). The weekly chart’s EWP points to two more rallies (black major-5 and blue Primary-V) after an initial pullback (major-4) before this Bull run is over. Whereas the monthly chart suggests, we could see three more rallies (add purple Cycle 5). I always have an alternate (more Bullish) EWP count for Bull runs like ETH is in to ensure my Premium Crypto Trading Members do not miss out or get caught on the wrong side. The market will eventually tell me which one is correct: “anticipate, monitor, and adjust if necessary.”
What we do know, with all certainty, is that the weekly technical indicators (RSI5, MACD histogram, FSTO, and MFI14) are all negatively diverging (red squares). Although divergence is only divergence till it is not, it means ETH is now moving higher on less strength, less momentum, and less liquidity. The latter is essential because liquidity drives markets. If the buying dries up, only selling is left. However, ETH is well-above all its important Simple Moving Averages (SMAs), which are all rising and Bullishly stacked: 10w>20w>50w>200w). Thus this is still a 100% strong, Bull market.
The monthly chart is different as there are no negative divergences on the technical indicators. Instead, the RSI5 is getting very overbought, suggesting there’s less room for upside left over the next 1-2 months. See the 2017 rally for example. However, the monthly Money Flow is still strong, and so is the MACD. Only the FSTO is not in favor of more upside.
Nonetheless, also on the monthly chart, the SMA setup is 100% Bullish: ETH is well-above its rising SMAs, which are also Bullishly stacked: 10m>20m>50m. Thus, this is still a 100% robust, long-term Bull market. Hence, the one-degree higher EWP count compared to what is labeled on the weekly chart has merit.
ETH’s weekly and monthly charts are 100% Bullish and suggest plenty of upside left over the coming months to years. However, negative divergences are creeping in on the weekly chart suggesting a pullback is most likely imminent. A daily close below $1657 will be a severe warning that the $1200+/-100 level will be revisited to complete a more significant correction before ETH can move to new ATHs again.