ETHUSD: Classic Breakout In Progress, But Watch 432 Resistance?

9 kwi 2018

ETHUSD Update: This market has established a double bottom formation around the 375 level and is now attempting to break out. I have placed a limit order to buy at 392 with a STOP at 365 and Target of 445. This is a potential swing trade with almost 2:1 reward/risk.

The current price action at the 416 level (at the time of this writing) is tempting but the problem is price is about to enter a minor bearish reversal zone (432 reversal zone boundary) . The double bottom structure is in place and the initial bearish trend line broken so the bullish signs are there, but being on the conservative side, I would rather capitalize on the possibility of a shallow retrace.

There is a minor .618 support in the 380s and relative to the double bottom, offers much lower risk in terms of placing a stop. I consider placing a limit order under the market like this an aggressive choice for me compared to waiting for price to retrace and then show evidence of a clear reversal formation like a pin bar at the predetermined entry area, but I am willing to take that chance in this particular situation.

The best swing trade entry was the break above the 372 inside bar which occurred on Friday. It offered the lowest risk and is now paying off nicely if anyone got in there. I mention this, even though I missed this entry, because this is what a low risk entry trigger looks like.

For those who are more aggressive, you can consider a long around the current break out level which is 418 (price has moved to 423 as I write this) , but the risk of a fake out is high. This is why I prefer to place a limit order under the market. If you do enter here, I think it makes sense to enter half of your original size here, and place an order for the other half under the market. This way, if the market continues higher, you are still benefiting. If the market fakes out instead, your risk is lower (only half of your original position) and you have an order in place to get a better price. You have to decide which is a better scenario for you.

If the 432 reversal zone boundary is taken out and price closes above it, then the bullish momentum is more likely to continue to the 451 level which is the .382 of the recent bearish structure. This is why I chose the 445 level as a potential target IF this market fills my order at 392.

In summary, the current price action is presenting a classic break out formation. Certainly a welcome situation that makes for a much stronger bullish argument. The problem with buying here is the high possibility of a fake out. It does not mean it WILL happen, but I prefer to buy near supports, not resistances. If the market does not retrace, and my limit order never gets filled, that is okay. I will cancel it and be prepared to enter on the next retrace, whether it is a shallow one or deeper one. Either way, this double bottom formation signals a short term trend reversal that can lead prices back to the high 400's to low 500's over the next week. Make sure to check out the free analysis on S.C. that will provide more detail on this market as it continues.

Questions and comments welcome. (I am going to change up my writing schedule. I will post a new idea every other day, and an update on the alternate days. This means tomorrow I will post an update to this report only, rather than a new report.)