Ethereum rallied during the week ending December 13th, initially falling last week before recovering largely over the weekend, resulting in a suspiciously green candle that made up all lost ground during thinly traded weekend markets. It makes me wonder if this rally is in fact genuine or if the low volume rally is a veiled bull trap. The same occurrence happened in Bitcoin as well, so it'll be worth watching this week to see how this plays out and what the market tells us ETH is likely to do going forward.
(December 13, 2020 7:30 PM EST)
Outlook: ETH appears to be trying to stay high as it rallied back up to just underneath the $600 level where it found repeated instances of resistance. I still think the path of least resistance is down, although not for long. From here, I think the recent price action indicates a short-term pullback that ultimately finds support not long after. The question, then, is at what point does ETH likely find a strong support area to bounce from. Based on the Oct-Nov rally, our first and minimal stop would be the ~$507 level, or the 23.6% Fibonacci retracement. If ETH breaks below $500, look for support around $450, which is a round number and former resistance area, and then the low $400s, which includes the 38.2% fib at ~$427 and then, of course, $400, which is a major historically inflection point. Remember, when ETH is trading above $400, it is predominantly in an uptrend. That has been the case since at least September, and based on the recent breakout to the upside and smooth ascending channel on the weekly chart, I don't see any reason to change my mind unless i see a break in that channel to convince me that the trend has been invalidated.
To add even more intrigue, if you saw my recent Ethereum Monthly Forecast (January), you saw my analysis of how ETH looks to be setting up for a massive bullish breakout on the longer-term charts that will crush ETH's January 2018 high. This, in confluence with the weekly chart's seemingly bullish breakout pattern now developing, points to ETH making a rapid recovery up to the $1,000 level or higher in the not so distant future, most likely in H1 2021.
I'm a buyer on short-term dips - from a long-term perspective, I think ETH under $1,000 is great value, so to be able to get ETH under $600 is still a great discount - even in the medium term!
Support: I'm looking for support around the $500 level, then $450 and ultimately $400, which is my line in the sand. The 50 Week EMA is turning up and approaching the $350 level, which should give further support to $400 as it continues to rise.
Resistance: $600 is the immediate resistance, and I need an impulsive candle above it and holding it to prove a sustained rally. After that, $700, $800, and $1,000. After $1,000, ETH will probably start to trade similar to Bitcoin a few years ago where it starts moving in larger increments as investors inflows dwarf the market cap, causing rapid price discovery and causing euphoric jumps in price.
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