Ethereum had a wild Friday, trading in a nearly $200 range dipping below $1,100 and reaching above $1,250 to form a bearish Doji candle. The long wicks indicate volatility on both sides as buyers and sellers clash over uncertainty and short-term vs longer-term perspectives. While many permabulls hurriedly jumped to bullish conclusions earlier this week following the selloff and claiming the warned 30% dip had already completed, this does not appear to be the case as this recovery couldn't even reach $1,300 let alone ETH's local high at $1,350, adding validation to our primary view that ETH's recovery this week was a deadcat bounce: ETH is going lower.
(January 15, 2021 8:30 PM EST)
Ethereum went back and forth before closing the Friday trading session in the red a bit, dropping about $50 as we head into the long holiday weekend (MLK Jr. Day in the US on Monday). It looks like our primary view that this week's recovery was an exhausted rally and a dead cat bounce that led to a rejection today around $1,250 to form a double-top, leading to another selloff. 30%+ corrections are rarely completed within one or two days so I suspect there may be more downside yet to come, which is fine because ETH should find higher support and print a higher low well above the previous zones. Plus, I don't think ETH can even break below $800 at this point, which would be a greater than 50% retracement and test of the rising 50 Day EMA which is at $732 and rising.
Going forward, I'll be looking for support at one of the Fibonacci retracement levels above - $950 (weaker), $800/50% Fib (stronger), $700/61.8% (absolute floor). ETH, like BTC, is going higher, and not far down the line either, I just don't see the value in chasing the trade if we can accumulate more at lower prices with a little patience. By now you should have a majority of your medium-long term position at a substantially lower cost basis as I have been alluding to for months, now is simply when we add to our core position on pullbacks for value. After all, 2021 should be an even more bullish year for crypto than 2020, so buying on dips here is a privilege given how low ETH is in the grand scheme of things.
I think the best strategy here is to buy the dips and even earn ETH wherever possible. Otherwise, DCA is the way to go. In all likelihood, this is most likely "The Dip" we've been waiting for; it will likely take a while to resolve and could grind lower for a few weeks before finding a bottom. However, I think 2021 will be substantially better for crypto and ETH in particular, although ETH has outperformed BTC in 2020 so really it's no surprise there.
Support: Look for local support around $1,000. Below that, look for support at my primary support at the 50% fib around $830, which will soon be supported by the rising 50 Day EMA just below around $766.
Resistance: Near-term resistance looks to be around $1,300, just under the ATH around $1,400. If we can break above that, then ETH will look toward $1,500 and then $2,000. Longer-term, I think a $5,000 - $10,000 ETH by 2022 is not only realistic but likely given crypto's adoption, ETH 2.0's launch, and the fiat currencies' rampant inflation.
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