Ethereum is trading below a key major harmonic level. Mixed signals from a bearish and bullish perspective.
The 1/8th Major Harmonic
The chart above is an amalgamation of various theories on the geometric constructions of a chart — mostly made up of Gann’s theories. The vertical lines on the chart represent a 192-day Law of Vibration Cycle, while the horizontal price levels represent the harmonic price levels. The harmonic price levels are not actual ‘harmonic’ numbers or valuations that one would use from the works of Brown or Plummer — these are an equal division of 8. These particular price levels are derived by taking the next highest natural squared number above the all-time high and the next lowest natural square below the all-time low. The second to last Major Harmonic for Ethereum rests at 181.38. Ethereum has been trading below this level for the past two consecutive days. Major Harmonic price levels are the most difficult levels for price to move above or below — they are naturally strong resistance and support levels. But each level has its kind of ‘behavior’ that can be interpreted. The 1/8 major Harmonic is not only the second to last Major Harmonic level, but it is also the most extreme oversold condition on Ethereum’s chart.
Evidence of the difficulty of moving below this level is apparent. The most recent major break below the 1/8th major Harmonic was on August 27th. Ever since that date, we’ve seen price oscillate above and below this key price level — but most of the trading has occurred below this level. Even if the price were to drop below this harmonic, there are two important inner harmonics just below. The 7/8th thinner harmonic (-1/8th) at 157.19 and the 6/8 thinner harmonic (-2/8th) at 135.84. Now, a perfectly normal reaction to an initial break of a Major Harmonic is for price to move to at least the -1/8 thinner harmonic. From a long perspective, the ideal situation would be for price to move down to the inner 6/8th harmonic because 90% of the time price will experience a violent reaction to drive almost immediately higher to the Major Harmonic where it rests, and them moves higher. This generally creates a brand new trend and initiates a series of short-covering rallies.
From the current condition of the chart above, I would predict that any move lower would result in a swift move down to the 6/8 thinner harmonic at 135.84. The reasons for this are chiefly due to the volume profile. There is a high volume node in between the 1/8th Major Harmonic and the 7/8th(-1/8th) inner harmonic, but the next high volume node is directly on the 6/8th(-2/8th) inner harmonic. Because of the conditions of the volume profile, I am predicting that if Ethereum fails to breach and remain above the 1/8th level, then the ideal scenario of a flash crash down to 135.84 is the most likely. But there is significant pressure to keep prices at their present values, so a keen eye on this market is required.