Why $180 ETH Is Now Critical for the Bulls
Trading Ether (ETH) is rarely easy, particularly when bad news surrounding one of the most popular cryptocurrencies isn’t offering any reprieve for enthusiasts.
But it’s often a good idea to remind ourselves what the chart says before reacting emotionally to the news. Moreover, successful traders would argue that the best time to buy is when others start panic selling.
The longer-term perspective for Ethereum
ETH/USD 12-hour chart. Source: Tradingview
For example, the left-hand side of the chart shows the doldrums of the year-long bear market. In retrospect, this was one of the best buying opportunities for Ether.
Ether investors can often get shaken out of their positions when a particular round of bad news hits the internet. But the chart seems to follow a similar type of movement to Bitcoin.
Of all the cryptocurrencies, Ether is one of the most correlated cryptos (correlation coefficient of 0.461) with BTC as opposed to bleeding out like most other altcoins do every time Bitcoin decides to shift gears.
This makes trading Ether somewhat easier than an illiquid altcoin. For example, if Bitcoin has a surge of volatility, ETH is most likely to follow suit — and in some cases — even lead BTC.
The $160 support level is key
A quick look at the daily chart shows that ETH/USD may very well be setting up a support level for its next move up. Lose it, however, and it could spell disaster for holders and Ether traders alike.
ETH/USD Daily chart. Source: Tradingview
The level at around the $160 is an important area. It’s where a large amount of buying took place to get past the $185 resistance level that had been holding the price down for the best part of 6 months.
Therefore, one could attribute this level to the beginning of what was a pretty big shift in market structure for Ether. Getting back down to this level isn’t particularly worrisome, however.
Large moves in the markets tend to be retraced more often than not, particularly on speculative assets like cryptocurrencies.
The question now that all Ether traders and holders would like to know: will the key support level break?
It remains to be seen. But if it’s going to start moving up from anywhere, the most logical place would be around the current price point.
But to avoid falling further into the abyss, ETH needs to set a higher low. As of right now, it appears to be attempting exactly this on the chart. Additionally, a break in the market structure above the most recent high at $180 could finally wake up the bulls.
Two false dawns, or is there hope yet?
The 4-hour chart tells a compelling picture, where two resistance levels were broken recently (labeled A and B) and ETH/USD started to show a bit of strength. However, during both times, ETH price was pushed back down for more doom and gloom.
ETH/USD 4-hour chart. Source: Tradingview
The larger structure shows a compressed move down into the daily support level, and this is usually indicative of a trend reversal. The only question at this point would be whether there is enough buying interest in ETH to follow through.
Currently, ETH has put in a higher low on the chart after bouncing from demand (the blue box at $165). A move above the $180 level from here would all but confirm a new bullish trend is starting to form.
What happens if ETH breaks support?
Anyone trading Ether at the moment is surely taking a risk if they are looking to buy here. However, the current levels offer the best risk-reward at the bottom of a potential new uptrend.
Unfortunately, if the downward trend does not reverse then a rather grim bearish scenario is likely to play out. Currently, ETH isn’t showing much support until the low $100s and this could offer a good opportunity to short should Ether go below $160.
A break below this key support level would mean more downside, if not a sharp plunge. The easier it is to break a key level, the less one wants to jump in front of a moving train — much better to catch a ride on it instead.
One would do this by looking for any short-term rallies in price once this key support has been broken. Once identified, shorting with an initial target around the $130 area could present itself as a lucrative trade.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.