Overall bearishness remains across the cryptocurrency sector with Bitcoin leading the drift lower. Ethereum attempted to advance, but was unable to escape bearish sentiment and the ETH/USD reversed to the downside. The recovery out of its support zone resulted in an intra-day high of 192.91 and warranted the drawing of a new Fibonacci Retracement Fan sequence. Price action already completed two breakdowns below this new sequence and bearish momentum is expanding which could extend into a full reversal of the previous breakout.
The Force Index, a next generation technical indicator, confirmed the initial breakout of the ETH/USD above its support zone. After price action reached its short-term resistance zone, bullish momentum started to fade and the Force Index entered in a sideways trend as price action attempted a breakout which was reversed into its ascending 38.2 Fibonacci Retracement Fan Support Level from where the most recent advance emerged; this turned the short-term resistance zone back into support. The Force Index completed its own breakout above its horizontal resistance level, turning it into support, but failed to advance past its descending resistance level. The reversal has now pushed this technical indicator below its ascending support level in negative conditions as marked by the green rectangle and resulted in a strong bearish signal. You can learn more about the Fibonacci Retracement Fan, the Force Index and the Support Zone here.
As ETH/USD has retraced its breakout back into its short-term support zone, located between 171.88 and 178.08 which is marked by the grey rectangle, a breakdown is pending due to the increase in bearish pressures. The reversal also took price action below its ascending 50.0 Fibonacci Retracement Fan Support Level, located inside the support zone, turning it into resistance. Traders should now monitor the Force Index following the breakdown below its ascending support level which is expected to extend into a breakdown below its horizontal support level, leading this cryptocurrency pair below its short-term support zone and below its 61.8 Fibonacci Retracement Fan Support Level.
A confirmed breakdown below its short-term support zone, which will turn it back into resistance, should clear the path for ETH/USD down into the next long-term support zone which is located between 147.84 and 157.64. This is where the initial breakout sequence originated and it would complete a full reversal of it. Ethereum has struggled to regain its footing after the 2018 collapse, but is holding on to the #2 spot in the cryptocurrency market, judged by market capitalization. You can learn more about a Breakout, a Breakdown and the Resistance Zone here.
ETH/USD Technical Trading Set-Up - Breakdown Scenario
- Short Entry @ 174.50
- Take Profit @ 148.00
- Stop Loss @ 180.00
- Downside Potential: 2,650 pips
- Upside Risk: 550 pips
- Risk/Reward Ratio: 4.82
Volatile moves are common in the cryptocurrency market and if the Force Index can push above its descending resistance level, a breakout is likely to follow and take ETH/USD back into its resistance zone. This zone is located between 210.03 and 219.72 which is marked by the red rectangle. A fundamental catalyst would be required in order to force a breakout sequence which can take price action past its intra-day high of 192.91. The current fundamental as well as technical picture favors a breakdown.
ETH/USD Technical Trading Set-Up - Limited Breakout Scenario
- Long Entry @ 186.00
- Take Profit @ 211.00
- Stop Loss @ 174.00
- Upside Potential: 2,500 pips
- Downside Risk: 1,200 pips
- Risk/Reward Ratio: 2.08