Ethereum rallied during the week ending December 27th, initially treading water against BTC before finally breaking upwards today above the $700 level before pulling back a bit to close the weekly candle just underneath around $690. Just as ETH was starting to look particularly lagging and weak, it responded with a bullish breakout to the upside. This is a bullish candle and prints a new local high for ETH as we prepare to head into the new year.
(December 27, 2020 7:30 PM EST)
Outlook: Ethereum broke out to the upside again, printing a new local high and reaching the $700 level for the first time since 2018. This is, of course, bullish for ETH as it continues to lag BTC but only because BTC dominance is highest during early stages of bull markets. Fundamentally and technically, things are aligning very strongly for ETH to have a powerful thrust higher in 2021, possibly as early as Q1. I have been saying for weeks that ETH is undervalued, even at these levels, as it is still more than 50% down from the January 2018 highs. Going forward, I'm looking for ETH to continue to grind upward on the back of BTC strength and eventually BTC rotation into ETH, then alts. For now, ETH will be targeting $700, then $800, $900, and $1,000.
The daily charts look very strong which points to higher prices, but you have to consider the weekly and monthly charts to see how it takes time for long-term investors and traders to change sentiment. That's why we haven't seen a major shift in ETH yet because most BTC leads all cryptos, and because it does and is the largest cap crypto with the largest market cap, it garners the most attention and inflows. Because of its size and attention, it recovered the fastest and first and, once it reached and broke the previous ATH, all bets were off: stop-limit buy orders were triggered, major investors saw this as a bullish breakout signal on all timeframes, particularly medium-long term timeframes, and money has been pouring in from everywhere for all kinds of investment horizons. ETH almost assuredly will benefit from a similar sentiment change, it just historically has been a little bit later for alts to get any meaningful attention or investment behind BTC.
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 $600 level, then $500, then $400. $400 is further supported by the 50 Week EMA but I think $400 would be an unlikely retracement target to the downside and would only be reached under a worst-case scenario event. More likely, $600 may be touched again on a pullback or ultimately $500, but likely no lower.
Resistance: $700 is the immediate resistance, which ETH will look to battle for this coming week. After that, $750 and $800 all the way up to $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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