Trading

ETH/USD Price Analysis: Major Trend Line Provides Lifeline for the Bulls

August 23, 2019

In the previous price analysis blog post, we analysed Bitcoin’s recent move lower and the retest of the major bull/bear line. Similarly, Ethereum is doing the same, however, it looks slightly more bearish than the world’s biggest digital coin.

It was announced in the recent days that Ethereum could become the first public blockchain on Hyperledger if the technical steering committee approves a proposal to adopt the ConsenSys-backed Pantheon project. If accepted, Pantheon will be renamed Hyperledger Besu. 

In similar news, Ethereum is currently charging around $0.11 ether per transaction, which represents a 50-day low. Ethereum’s founder Vitalik Buterin gave an interview to Toronto Star recently in which he spoke about the difficulties and challenges facing Ethereum and the entire cryptocurrency community. 

“The main problem with the current blockchain is this idea that every computer has to verify every transaction. If we can move to networks where every computer on average verifies only a small portion of transactions then it can be done better.”

On the value of the cryptocurrency market, Buterin insists he is not concerned. 

“There is also the fear that the price will drop to zero, but that’s not a technical issue. I believe people will gain confidence over time”.

Looking at the ETH/USD Market: bear flag formation

However, looking at the ETH/USD daily chart, crypto traders and investors aren’t as positive as Buterin is. On a daily chart, we have a bear flag formation. This pattern is characterized by a bearish trend, followed by a pause in the trend line i.e. the consolidation zone. The price action has already broken the flag support, in addition to a break of the 200 daily moving average (DMA).

ETH/USD bear flag
ETH/USD bear flag (Source: TradingView)


In case we stay below the flag support, which now acts as a resistance, the bear flag pattern points towards the $60 region, which is slightly below the major horizontal support (the purple line). At this point of time, both daily moving averages - 100 and 200 - can be seen as a resistance. A major bearish event was the break of 100 DMA, after which the price failed on three separate occasions to move back above this resistance zone. Afterwards, we saw a quick trip below 200 DMA as well as Ethereum bulls have failed once again to clear the resistance (previous support). 

Fibonacci retracement support

The second price chart below shows similarly bearish developments concerning ETH/USD. A major push lower only stopped at 61.8% Fibonacci, which is widely regarded as the key retracement support zone. Despite the brief move below this level, the bulls managed to recover in a bid to test the 200 DMA once again. A failure here will likely result in a quick trip to the next Fibonacci retracement support - 78.6% - which sits just below the $150 handle. 



ETH/USD Fibonacci retracement
ETH/USD Fibonacci retracement (Source: TradingView)


More importantly, the major trend line has come into play in the recent days. It has connected lows since 2018 with the latest two touches from 2019. This trend line can be regarded as the major bull/bear line for ETH/USD, as any sustainable close below this zone, which is currently located just above the $180 handle, can provide a major boost for the bears. Given the importance of this trend line, it should be followed closely.

At this point, the break of the trend looks like the most probable scenario for the ETH/USD given the overall bearishness. A break of this support zone will likely accelerate potential completion of the bear flag pattern in the lower $60s, which may drag other altcoins down as well. 

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