Ethereum TA discussion: Bollinger bands tightening! Due for a breakout (or break-down)?

xaero1 (57)in #trading • 7 years ago (edited)

Hi fellow traders,

Right now, I'm paying very close attention to the ethereum charts! Here are some of the things I'm noticing:

(1) We've had a few attempts to break down recently, but each time it seems to spring back up to around the $130 level.

(2) Bollinger bands (b-bands) are tightening on the 4-hour chart (as shown by the gap between the magenta arrows):
Screen Shot 2017-07-23 at 19.12.33.png

However, the 4-hour chart is quite a short time frame. The 12-hour chart had very tight b-bands before the breakouts for the recent very large moves, e.g. at around $50, and at around $100, as shown below:
Screen Shot 2017-07-23 at 19.13.53 2.png
If we're looking for the b-bands to get tight on this timeframe, I'm guessing that could be up to some weeks away (if we don't get a major break up or break down before then).

Note that tightening b-bands do not imply a break upwards, of course! This is just one possible outcome. But in my experience in crypto, tightening b-bands can often herald either a break up or a break down. Here's a counter-example which shows a recent break-down, following tightened b-bands on the 2 hour chart:
Screen Shot 2017-07-23 at 19.54.14.png

(3) The 12-hour chart EMAs recently crossed back over to the positive direction. To me, this a very bullish indicator because these EMAs were positive for the whole of the move upwards, and for most of the recent move downwards:
Screen Shot 2017-07-23 at 19.13.53.png
One trading strategy would have been to use the cross-over points on the EMAs on this timeframe as places to buy and sell (which I've marked on the chart with 'buy(?)' and 'sell(?)' annotations). However, just because this time-frame would have worked well for the last 4 months, it in no way means that continuing to use this timeframe for the next 4 months would still generate a profit. Moreover, in a consolidation period, using EMA cross-over points on largish timeframes are quite likely to lead to a loss rather than a profit (imo) - it all depends on what type of 'chop' occurs. [Just to be quite clear: I'm not advising the reader to 'buy' - because I marked a 'buy(?)' annotation on this graph; instead these are just points to sell and buy at if you had happened to be following this particular strategy during the last 4 months.]

(4) The MACD on the 1-day graph recently turned green:
Screen Shot 2017-07-23 at 19.17.22.png
I've marked this cross-over point with a magenta arrow, as well as marking some previous red->green cross-over points with magenta arrows too.

(5) On the negative side, however, the MACD on the 1-week chart looks like it could turn red soon (marked with a blue arrow with a question mark!):
Screen Shot 2017-07-23 at 19.19.54.png
Also, the MACD on this timeframe is showing an 'overbought' situation. I don't think this makes a bounce up impossible - even if it were to turn red, but I wouldn't be so positive about seeing a large increase in value if and when this turned red.

(6) The 3-day chart currently consists of what I might think of as 'mixed' sentiment:
Screen Shot 2017-07-23 at 20.51.55.png
On the positive side and this is super positive imo, is that the EMAs are still in positive territory (just!). I.e., the gold coloured curve is still above the cyan coloured curve. If however, the curves had crossed, then I would take this to be very negative; but, at the moment it's just-about holding :)
On the sightly negative side, the 'bounce' on the timeframe looks to have stalled a bit. One way to see this, is that the angle of upward movement (blue arrow) is less than the angle of the downward movement that preceded it (magenta arrow). If the upward movement had had a similar angle of incidence to the downward movement then it should have followed somewhere closer to the cyan arrow marked on the chart.

(7) Finally (positive), we had huge volume on the recent bottom, but we haven't had a very significant retrace back up, since (as also discussed in the previous point). Of course, we may not get any more retrace, and we could get a lower low before we see a new uptrend developing. On the other hand, however, because the bounce did not get that far back up, perhaps there is still room for some more upward movement. The following chart shows the fibonacci retrace levels between the recent top and the recent bottom:
Screen Shot 2017-07-23 at 19.18.45.png
As we can see, the bounce briefly went above the 38.2% level, but it did not quite touch the 50% level; and it was nowhere close to the 61.8% level (or the 78.6% level!).

So what's my take on all of the above factors?

I think it's possible we could get a break upwards, but I'd be probably be looking to place sell orders in a range somewhere around the span between the 50% and 61.8% retrace levels.

Another strategy would be to wait for the b-bands on some timeframe (e.g. 4 hour, 6 hour, or 12 hour) to continue to tighten. Then, once they started 'un-tightening' due to a break in the upward or downward direction - that could be the time to buy or sell (respectively).

Another strategy is to follow the EMA cross-over points, on some timeframe. If you were using the 4-hour chart, the 12-hour chart or the 3-day chart, then you should be holding ETH at the moment. You would then need to watch closely for the EMAs to cross to the negative direction, on one of the aforementioned timeframes - and then sell, when this occurred. Interestingly, If you were following the EMA cross-over points on the one-day timeframe, however, you wouldn't currently be holding ETH because the EMAs are still in the negative formation; instead you would be waiting to buy when they crossed to the positive direction.

Out of the above, I think my preferences would be either to use the 4-hour or 12-hour chart EMA crossover points. And if I were using this strategy, I should be holding ETH right now; hoping to take a profit if we get a spike up; but looking to sell if we get the EMAs crossing to the negative direction for my timeframe. In addition to this, I might likely also sell, if the b-bands on one of the timeframes started to 'un-tighten' due a significant move in the downward direction. What what happen here is that the price would the hit the bottom of the b-band, but instead of bouncing back up, it would continue dropping, thus resulting in the b-bands widening!

Potential profit if ETH hit the 50% retrace level: (273-231)/231 = 18% profit + upside potential if we exceeded the 50% retrace level.
Potential loss if ETH breaks below the 4 hour b-bands: (231-217)/231 = 14% loss + slippage if a large spike down occurs.

Overall, though, I'm probably a bit more bullish than bearish right now: I.e., the potential profit is perhaps looking more temping than the potential loss! ;)

Does anyone else have views/TA on the short/medium term ETH price, or any comments in general? :)

Finally, thanks for reading (if you made it all the way to the end of this post ;) )!

DISCLAIMER: I am not offering trading advice. Any comments in this post are merely things I might consider doing, and I'm not advising the reader to follow any of these potential strategies. I am not advising the reader to either buy or sell Ethereum. The reader must take full responsibility for any trading strategies they use, in regard to anything read in this post.

#ethereum #cryptocurrency

7 years ago in #trading by xaero1 (57)

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rtdcs (63) 7 years ago (edited)

In short term I think is break-down!

But I always buy ETH (my think is long term).