by Jamie Holmes
Following a recent high at the psychological $10 level, downward momentum has dominated as illustrated by the 4-hour chart below. The market is currently trading within the Ichimoku cloud which is currently providing support. However, bearish momentum is indicated by the relative position of the base (dark-red) line and conversion (blue) line where the base line moved above the conversion line yesterday. Also, notice the market is breaking below the base line and if there is a 4-hour session close below the base line, this will give further confirmation of bearish momentum.
The Ichimoku cloud is still green, but it is not trending upward. Also, since the high at $10 was made, we have seen three sell fractal levels (indicated below by the green arrows) but only one buy fractal (red arrows) suggesting a downward trend is emerging. Therefore, short positions in ETH-USD are least risky and an extended downward movement is expected if the market manages to break below the Ichimoku cloud.
The most important fractal levels are indicated on the chart, providing immediate resistance and support levels. A 4-hour session close below the fractal support at $8.46 will see $8 exposed once again. On the other hand, a 4-hour session close above the fractal resistance at $9.38 is required to validate a bullish outlook over the longer-term. A break of the fractal support is looking more likely and the base line is providing minor resistance at $9.05. A close above the base line will give the first indication of a switch in momentum from bears to bulls in the market.
The longer-term outlook is illustrated by the daily chart below and in short, the risk to the downside is higher if the market closes below $8.86999. However, we could see bulls regain control over the long-term if the market manages to stay above $8.86999 which was a key fractal resistance that was broken. The most recent fractal support lies at $7.00. The Ichimoku cloud has turned red, suggesting we should look for long-term sell positions.
A daily close below $8.50 today would give a bearish signal as the conversion line is providing minor support going forward. A close below the conversion line would see the $7 level exposed once again and we could see the market test fresh lows. A bullish outlook would only be validated if we see a daily close above the base line, currently at $9.565.