by Jamie Holmes
The cryptocurrency powering Ethereum's blockchain, ether, has managed to reach a fresh all-time high just above the $50 handle and experienced a huge increase in volume, as more traders, investors and speculators are drawn to the altcoin.
In comparison to the Bitcoin community, Ethereum looks to be steaming ahead at this point. The Enterprise Ethereum Alliance, progress on the long road to Proof of Stake, and a string of commentary from mainstream media have all likely contributed to the recent appreciation, where ether or ETH-USD scaled a fresh high at $51.90 on March 17. But where will the cryptocurrency head next?
The chart below shows the five day price action, with a new candle opening for March 17. The candlestick that has just formed is a bullish Marubozu, providing ideal entry points into the strong upward trend. The support levels indicated are at the 50 percent level of the Marubozu candlestick and at the open level, that is $32.9999 and $21.24999 respectively.
Notice that the market has achieved the initial Fibonacci extension target at $34.30, which BTCManager highlighted as a target on March 6, and it looks as if the second target at $55.02 will be reached as well. Notice, that at the time of writing, the five-day candlestick displays a doji, suggesting indecision within the market. However, the support level at $32.99 has held, suggesting there is a strong probability that we see the $55.02 level reached by the close of the current five-day candle on March 22.
Also, notice the huge increase in volumes over the past ten days for ETH-USD on the Kraken exchange, with buying interest dwarfing levels seen in the run up to the previous all-time high at $21.48995. Volume precedes price, therefore the large spike in volume, especially over the past five days, provides room for further upside.
Across all exchanges and currencies, volumes over the past 24 hours are around $560 million for ETH, closing in on bitcoin's $785 million.Therefore, the fact that trading volumes are beginning to match bitcoin's and that buyers have remained firmly in control over the past five days points to a bullish outlook for ETH-USD. The bulk of the trading volume for ETH is the ETH-BTC pair on Poloniex, accounting for just under 30 percent of the the total ETH market.
Looking at the price action for ETH-BTC, we see that bitcoin dominance over cryptocurrency markets may continue to suffer. The weekly chart below shows that if ETH-BTC remains above 0.0372, we will see a long-term surge of ether against the value of bitcoin. Also, notice two simultaneous bullish signals that are forming this week. Firstly, the market is now above the Ichimoku cloud for the first time, suggesting a long-term uptrend, Secondly, the Awesome Oscillator has moved from negative to positive territory, which indicates bullish momentum is just getting started when taking a long-term view.
On the other hand, a failure to remain above 0.0372 by March 20 will most likely see ETH-BTC head lower, as the rejection of the fractal resistance usually indicates a new fractal resistance is in the process of forming.
Over the long run, $55.02 and $75.75 provide key resistance levels, as indicated by the structure of the market and its Fibonacci extension levels. Supports are found at $32.99 and $21.2499, so it may be best to wait for ether to unwind before buying into the ongoing uptrend for a long-term buy.
The shorter-term outlook is displayed below with the 4-hour Renko chart. We can see that the market tried to breach above $50 but could not remain above ~$52 for long enough, so the Renko candle forms a high at $48.9016. A move above this level would give an indication that Fibonacci extensions at $55.02 and $75.75, therefore, we can place limit buy orders just at $49.0016 with an initial target at $55.02.
On the other hand, the chart also tells us that a red, bearsih Renko candlestick will form if ETH-USD manages to sustain below $40.01. To take advantage of a possible pullback to $32.9999 or even lower, we can set limit sell orders at $39.9104. The chart above shows that the previous red Renko candle gave a false signal and was subsequently reversed, however, the switch in the color and direction of the Renko is usually a very reliable indicator. As the chart illustrates, it would have worked well for a simple buy at $17.78 which would still be an open position at current rates according to this trading strategy, with the trader still waiting to take profit.
However, the next red, bearish Renko will most likely not be a false signal. Firsly, notice that although using the usual Japanese candlesticks show higher volume for ETH-USD, the Renko chart above shows declining volumes since the previous all-time high. Since the Renko charts abstract from time and instead focus on market movement, once the reversal signal is given and a red Renko candle forms, this will be an attractive opportunity to short ETH-USD.
In summary, we should see the uptrend continue over the long-term toward $55.02 and possbily $75.75 as well. A break below $40 in the short term will point to a correction that could go as low as $32.9999, a key support level, as well as $21.24999. However these should be seen as entry points to buy, as candlestick analysis indicates that the uptrend is valid as long as the market is above $21.24999. No matter which way it goes, one thing is for sure. Ether is here to stay and the rising trading volume is helping it to galvanize its place as the second largest digital asset.