Traders, I advise you to read this entire post to gain a better understanding of what I'm looking at.
It's been a while since my last trading position on ETH, back in August price completed a valid bearish bat pattern (shown on the chart) which was followed by a decline of almost 50% in two weeks.
Taking the time to reflect on Ethereum's situation from a technical standpoint the future direction is now becoming far clearer.
It has been struggling to break the $300 range for sometime now but a move above $400 is on the horizon.
Today I'm going to break down every aspect of the chart and explain in detail what I feel is happening from a technical perspective.
We're on the 4h chart with ETH/USD.
1. Bearish bat
The measurements for a valid bat pattern are detailed below.
B: 0.382 - 0.50
C: 0.382 - 0.886
D: 1.618 - 2.618
Final X to D: 0.886
A closer look on the 4h chart at my previous pattern, take profit levels 1 & 2 were achieved in a relatively short time period.
2. Daily price structure
Right now price is trading within a small zone, between a minor resistance and newly formed support trenldine, which aligns with levels A & C of the bearish butterfly .
3. Bearish Butterfly
The measurements for a valid butterfly pattern are detailed below.
B: 0.786
C: 0.382 - 0.886
D: 1.618 - 2.24
X to D: 1.272
It's not uncommon for harmonic patterns to occur one after another, especially with the previous pattern securing a nice return.
Currently price is completing the C to D leg of this structure and I estimate the pattern will complete on the 30th of November based on my measurement rules shown below.
The amount of time it takes price to form X to B is the projection for B to D.
Now remember, this is not certain... There will be many times when patterns take 2x longer to complete and still result in a profit.
I am only using my common principles to accurately determine the completion of the pattern.
4. Current price action
I would focus on the basics as of right now, I'm looking for a break of minor resistance and the support trendline to hold in order for the bearish butterfly to complete.
In the near future I will update this idea with my thoughts on Ethereum.
If we experienced a situation where the following happened.
It would still be a valid setup, as long as the C point does not exceed 0.886 and the lower trendline support is in tact.
If the bearish butterfly pattern completes I will let everyone know if it is a good area to short or close long positions, what we may find it the future is price pushes to around $520 at a 1.618 extension .
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