Should You Buy Ethereum Soon?

Dr. Arnout Ter Schure
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Last week I showed, see here, using the Elliott Wave Principle (EWP) and Technical Analysis (TA) that Ethereum (ETH) was most likely about to embark on a nasty correction to $1300s. It was trading at $1920s then, topped a few days later at around $2040 and dropped this week to as low as $1361…

Thus, (black) major-4 -as shown in last week’s chart, is IMHO now underway and has already reached the ideal target zone as outlined last week ($1300+/-100). So is this wave-4 already complete, and can we now expect the rally to $3000+? Hold your horses, not so fast. Let me explain.

Figure 1. ETH daily chart with detailed EWP count and technical indicators.

The Elliott Wave Principle points to a bounce followed by the next move lower.

This week’s “flash crash” is what I call an “initiation wave”; it has set in motion the more extensive correction: blue wave-a in Figure-1. But, from EWP -and from studying chart patterns in general- we know that there’s always this “dead cat bounce” first before the next leg lower starts. In EWP-terms, this counter-trend rally is called a B-wave. B-waves always consist of three smaller waves: a, b, c. In Figure-1, I have labeled the B-wave in blue and its smaller waves in green.

IMHO, wave-a of B is now underway or has possibly already been completed, and green wave-b should ideally target $1495-1575, from which green (minor) wave-c will target $1845-1930, ideally. This upside target zone is based on a simple c=a relationship. It also matches well with a typical 62-76% retrace of the initiation wave-A. The caveat is that 4th waves are often the least reliable, i.e., most variable, and in addition to that, hardest to forecast price structures. In general terms, they can be considered as a healthy consolidation, i.e., profit-taking, after a big run-up (the prior wave-3) with lots of shorter-term twists and turns, rips and dips. Many would then call the “bull flags.”

Whatever we call it; after wave-A comes wave-B (now underway) and then wave-C: green-red-black path in Figure 1, which is not accurate in time. Assuming wave-B tops around $1880+/-40 and that wave-C=A, then wave-4 should bottom around $1200+/-100. From there, I anticipated the next larger multi-month rally: major wave-5. If the 2017 rally is of any guide, see last week’s article, then please know the major-4 wave back then was a 70% correction, but followed by an 1100% rally (!). Please keep these numbers in mind in anticipation of the pending wave-5.

Bottom line: shorter-term I am looking for a somewhat tricky, whipsawing, move higher, ideally to around $1880+/-40, but it could even challenge the recent all-time high. From there, I expect several weeks of downside back to $1200+/100. After that, I anticipated the next rally to ~$3000+. However, a weekly close below $1200 targets $900. That translates to a 55% correction, and if 2017 is of any guide, it would still be fully within the norm. Thus, trade ETH accordingly: sitting through a 40-50% correction thinking it will go to $3000 is not a strategy. It is dead money, which could be allocated somewhere else. And hope is never a strategy but a disaster recipe. Trade safe!

This article was originally posted on FX Empire

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