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).
Author
Dr. Arnout Ter Schure
Intelligent Investing, LLC
After having worked for over ten years within the field of energy and the environment, Dr.
