ETHUSD Update: The 295 support is compromised again, but price has not been selling off hard. The 286 level is the support that price has rejected significantly and I believe this area offers lower risk opportunities for long swing trades.
My previous trade was stopped out at 294, and I am back in at 297.63 (30% of initial position size) my new STOP is 283 and my new target is 335, reward/risk is around 3:1. So why long again?
The 286 area is still the acting support, and I have been watching for a bullish reversal pattern somewhere between the 295 and 270 area which is now in play. The pattern is a double bottom appearing right on top of the 295 support on the 4 hour time frame.
As I have written about before, the 295 level is the .382 of the recent bullish swing, combined with the historical buying action around the 286 level, and a double bottom formation on a 4 hour? The factors are lining up while the risk is still relatively low. Even if the trade stops out for a loss, I will be happy to buy into this scenario every time.
The reason why I am in with a smaller position is a function of risk management. If this current 4 hour candle closes strong, and the high is taken out, I will buy another 30% in that scenario and have a position that is 60% of my usual size. On the other hand, if this is a fake out, and price continues below 285, I have an even smaller position and will incur an even smaller loss.
The reason I am aggressively buying back into this market is the reward/risk is most attractive here since my STOP is at 283. If price can stabilize and produce a subsequent higher low while working it's way back into the 305 area, I will consider putting on another 40% to equal 100% of my normal position size and will evaluate the price action from there. My initial TARGET is 335 which puts my reward/risk around 3:1.
IF this market continues to fall apart instead, I will not add to this position and possibly exit earlier if I see the weakness. The first sign that this market has any chance of working its way back up into the low 300s will be a strong close of the current candle. A bullish engulfing would be a very good sign. A bad sign would be breaking below 290. If this market pushes below 286, the next significant support is the 258 to 232 area which is the .618 of the entire bullish structure from the sub 200 low.
Also if this position begins to falter or show signs of weakness, I will be quick to adjust my targets and/or get out earlier. It all depends on what kind of price action unfolds. The secret to making money (its not really a secret) is not about being "right", it is about getting out with small losses and making more than you lose when you win (position sizing has more to do with it than TA). This process can unfold in a series of stop outs before the win. TA provides the framework to be better positioned for the winning scenario and to provide a reasonable estimate of the risk involved. Just ask some of the top analysts in the community like @goldbug1 and he will tell you the same thing (and make sure to read his excellent analysis too).
In summary, the recent pull back into the low 290s still presents an attractive reward/risk opportunity for swing trades in my opinion. With the 286 level so close, any price stability and higher low formation form here will present a clear sign of strength and higher prices in the near term. A retest of the 330 to 350 is not unreasonable at this point, and that is my expectation for my reentry back into this market. The key behavior that I will be watching for is continuous confirmations of strength, like a strong 4 hour close, a push back up to 310 and a subsequent higher low. If this trade stops out, I will stand aside and reevaluate the market from there.
Comments and questions welcome.
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Placed an order to stop IN to add 30% more to current position at 301.50.
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Sold half of position for a loss. Will use the 283 stop for the remaining portion. I will update my reasoning in tomorrow's report.
@MarcPMarkets Seems like ETH may lay low until this bitcoin forking stuff is over. I thought it would have enough steam to break 355 but there was too much resistance. I held on to that one too long and barely got anything out of it's run up to 355.
Its been consolidating since the 412 high and 136 low. I would expect it to break out mid november after this bitcoin stuff. It will likely correspond well with breaking out of a short term flag that may have just started with the 355 high, and whatever the next low is. And then will break the flag formed from the 396 high and 198 low. and then break out of the flag formed from the 412 high and 136 low.
probably will correspond well with fib analysis, and wave counting, but Im not gonna bother to analyze it more until this bitcoin gold fork gets close.
and wave counting is too subjective for my tastes anyway.
MarcPMarkets
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@KevinWatson, thank you for sharing your perspective. The environment is certainly more challenging thanks to the forks, nothing wrong with waiting it out.
raghavgrover013
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Is this price action showing weakness or it's just weekend low volume thing?
MaxHastings
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@raghavgrover013, The price is showing weakness. There's been a huge amount of wealth transferred from alt coins to Bitcoin since the hard fork announcement, I think in the next few days you will see ETH drop in price to the next resistance zone. Also there has been no new wealth invested into crypto currencies. We sit at about 170-175 billion for all crypto coins, which is not a new high but the same high we had a few months back. Possible double top? Also alt coins still follow the BTC price when it drops, but not always when it rises, at least recently that seems to be the case. What I am afraid is that when the BTC fork happens, they'll be a huge sell off for BTC and alt coins, I think this may trigger the Eliott wave C for alt coins, and start of wave A for Bitcoin. This is just my feeling. I have been following Marc and his trades, but I think he needs to take into consideration of fundamentals and not strictly technical analysis to better understand when to enter the market. I think he will still make money because he doesn't buy the highs, but I think to save your capital more and increase your wins you should wait till the hard fork happens and see how the altcoins and BTC prices respond to it.
raghavgrover013
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@MaxHastings, Yeah that seems to be the case even though BTC is at it's high and we mirror when we drop even though we did not have enourmous gains like that.
BTC could sell off bad as you said but i am thinking a portion of that money ( gains from this BTC run ) could go back to altcoins as they are at same price or lower in price compared to when they would have exited for BTC for this recent run and some people might stay in fiat considering Nov fork is also near.
We also have Dovcon 3 coming in Nov 1-4 but thay can get overshadowed by BTC Nov fork. I am going to be in fiat till mid or end Nov until this BTC drama is over trying to find a lower entry point < 232. There is nothing in the road map as far as i know after this Nov BTC fork. One would come out to be a winner and market will resume it's bull trend from there.
Timing this market is very difficult but i suspect 200 zone might not be taken out if even BTC goes towards 4000-4400 range based on analysis.
Thanks for your response. Correct me if am thinkong wrong somewhere as i am quite new to this market trying to learn.