Ethereum sold off on Monday to start the week, initially putting in a new local high around $1,350 before getting rejected earlier on Sunday, falling sharply throughout the day and Monday to fall below $1,000, recovering to just above before closing the daily candle. This is a bearish candle with massive legs in both directions, indicating a likely trend reversal and continued selloff.
(January 11, 2020 8:30 PM EST)
Ethereum sold off on Monday to start the week, dropping nearly 30% in a single day before finding a bit of support in the $900-$1,000 area, closing the daily candle just north of $1,000. We've projected this correction coming for about a week now, looking for a healthy pullback to retrace the recent parabola and print a higher low and proportionate support levels. I think this selloff is likely a short-term phenomenon as fundamentally nothing has changed, today's price action was simply a reaction to recent price action and some short-term selling due to miners and traders taking profits.
Given the massive selloff bringing ETH back to last's week's prices, weak hands are expected to be mostly shaken out as ETH recovers, buyers continue to accumulate (even buy more), and ETH continues to appreciate against the USD in the wave of a blue wave of further stimulus money being printed and handed out to hundreds of millions of people, amount to trillions more of money-printing in 2021. In 2020 we saw the effects of massive QE and stimulus - stocks, crypto, and real estate all exploded in price following a 30%+ drop to dramatic new highs in 6 months or less.
In the short-term I'll be looking for ETH to find support and price to stabilize, allowing us to measure wave counts and continue to scale into additional long positions. In the medium-long term ETH is going up alongside Bitcoin, in fact possibly even more so as the mega-cap Bitcoin is getting too big to move quite as dramatically as "smaller" caps like ETH, the second-largest cap crypto project valued at around $120 billion. I have been contending for months that ETH will outperform BTC during this bull market and likely for the foreseeable future as institutional investors continue to accelerate into large-cap cryptos and ETH on its own as a measure of diversity and a better-performing asset, store of value, and of course, for the tech behind ETH 2.0.
I think the best strategy here is to buy the dips and even earn ETH wherever possible. Otherwise, DCA is the way to go and possibly store some dry powder for another 'larger' dip if we're lucky enough to get one in Q1 2021. I think 2021 will be substantially better for 2021, although ETH has outperformed BTC in 2020 so really it's no surprise there.
Support: Look for local support around $1,000, which has been pierced and is actively being contested. Below that, look for support around the 38.2% fib at $950, which has also been briefly pierced and a weaker short-term target, and my primary support at the 50% fib around $800, which I think will bear a wall of buying and offer ironclad support. This is further support by a trend of higher lows, a former resistance level turned support level and the rapidly upturning 50 Day EMA which is now above $700 and climbing.
Resistance: Near-term resistance looks to be around $1,300, just under the ATH around $1,400. If we can break above that, then ETH will look toward $1,500 and then $2,000.
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