Ethereum is at its long-term downtrend line – Should you buy?
|In our previous update about Ethereum (ETHUSD) from three weeks ago, we found “it’s been in an ascending triangle since 2020. An ascending triangle is defined by higher lows and equal highs. Thus, Ethereum remains in a long-term uptrend, …. If Ethereum drops to ~$2200 support first and then breaks out, we can expect ~$6190.”
Fast forward to today, Ether is now on this trend line, trading around $2150. Meanwhile, its daily RSI30 has dropped to 32. History shows that, except during the 2018 bear market, this level has offered low-risk, high-reward setups for those with a longer-term perspective and/or willing to Dollar Cost Average (DCA). See figure 1 below.
Figure 1: Ethereum’s daily price action since 2015
More about the RSI below. Meanwhile, what would the worst-case scenario be if that trendline doesn’t hold, while allowing for some whipsawing? That option is illustrated below, where we have applied the Elliott Wave Principle (EW) to ETH’s price action and find that it is in a more extensive higher-degree 4th wave, the black Wave-4. See Figure 2 below.
Figure 2: Ethereum’s monthly price action since 2015
In this case, Ethereum will choose the lower black dotted trendline, which has held the downside in check since 2021. It currently sits around $1450. From there, the 2nd-largest cryptocurrency by market capitalization can still advance for a (black) 5th wave to ideally around $6200 (4865-108+1450), which perfectly matches the breakout target from our initial analysis: “If Ethereum drops to ~$2200 support first and then breaks out, we can expect ~$6190.”
Lastly, please note that the monthly RSI5 has now dropped below 30. As with the daily RSI30, history shows that this has offered low-risk, high-reward setups for those with a longer-term perspective and/or those willing to Dollar-Cost Average (DCA).
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.