ETHUSD Perspective And Levels: Resistance Zone Above.
ETHUSD Update: Shallow higher low established at the 238 level while price is attempting to push the minor resistance at the 259 to 262 area. The problem is momentum is still bearish and the 271 to 291 resistance zone ahead can lead to a lower high.
The higher low in place is a great example of a reversal formation, the problem is it has appeared in a very limiting context. First, price did not retrace back into the 233 or 220 support areas which would have been fine if this market was presenting bullish momentum like just retracing from a new high. Instead, price is showing a higher low (a sign of strength) in an environment of lower highers and a .382 resistance zone just ahead in the 271 to 291 area. So buying into this price action for a swing trade presents risk that is too high until there is evidence of bullish momentum again.
Why would a pullback to the 233 level or 220 be any better? It would present a risk/reward that is much more attractive, which would make a swing trade worth taking. For example, a retrace to 225 and reversal allows for a target of the low 270s while placing a stop in the low 200s. Risking 25 to make 50 is worthwhile. Buying in the 260s allows for maybe a 15 to 20 point target, with at least a 20 point stop which offers around 1:1 which isn't bad BUT this is accompanied by the higher possibility of the 271 area asserting a lower high in this environment. So there is more working against the trade at these levels and the reason why I will continue to stay flat.
In order to prove bullish momentum is backl, price needs to push beyond 291. At that point, a subsequent retrace will offer a better opportunity because momentum will be more in favor of longs for a swing trade time horizon.
And don't forget, in my previous report I wrote about the Wave C in the BTC market which still has plenty of room to complete which again favors lower prices. And since the alt coins are playing follow the leader, any further sell off in BTC will weigh on these coins. Another factor that increases the risk of taking a swing trade at current levels.
In summary, it is very challenging not to get lured into price formations that look like great buying opportunities. What many less experienced participants fail to consider is the context of the situation. The formation looks good, but there are too many factors in the environment that reduce the attractiveness in terms of reward/risk. If price is going to reverse back up dramatically and return to the bullish momentum that we are all familiar with,it will offer plenty of opportunities to get back in at much more attractive reward to risk ratios, even if the price is higher. I have no problem taking more aggressive entries, but only when the context favors the position, and at the moment it does not.
Comments and questions welcome.
The higher low in place is a great example of a reversal formation, the problem is it has appeared in a very limiting context. First, price did not retrace back into the 233 or 220 support areas which would have been fine if this market was presenting bullish momentum like just retracing from a new high. Instead, price is showing a higher low (a sign of strength) in an environment of lower highers and a .382 resistance zone just ahead in the 271 to 291 area. So buying into this price action for a swing trade presents risk that is too high until there is evidence of bullish momentum again.
Why would a pullback to the 233 level or 220 be any better? It would present a risk/reward that is much more attractive, which would make a swing trade worth taking. For example, a retrace to 225 and reversal allows for a target of the low 270s while placing a stop in the low 200s. Risking 25 to make 50 is worthwhile. Buying in the 260s allows for maybe a 15 to 20 point target, with at least a 20 point stop which offers around 1:1 which isn't bad BUT this is accompanied by the higher possibility of the 271 area asserting a lower high in this environment. So there is more working against the trade at these levels and the reason why I will continue to stay flat.
In order to prove bullish momentum is backl, price needs to push beyond 291. At that point, a subsequent retrace will offer a better opportunity because momentum will be more in favor of longs for a swing trade time horizon.
And don't forget, in my previous report I wrote about the Wave C in the BTC market which still has plenty of room to complete which again favors lower prices. And since the alt coins are playing follow the leader, any further sell off in BTC will weigh on these coins. Another factor that increases the risk of taking a swing trade at current levels.
In summary, it is very challenging not to get lured into price formations that look like great buying opportunities. What many less experienced participants fail to consider is the context of the situation. The formation looks good, but there are too many factors in the environment that reduce the attractiveness in terms of reward/risk. If price is going to reverse back up dramatically and return to the bullish momentum that we are all familiar with,it will offer plenty of opportunities to get back in at much more attractive reward to risk ratios, even if the price is higher. I have no problem taking more aggressive entries, but only when the context favors the position, and at the moment it does not.
Comments and questions welcome.
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