A month ago, see here, Ethereum (ETH), aka Ether, had the potential setup in place to start its run to $9K. However, it failed at its 50-day simple moving average (SMA) and remained below its Ichimoku Cloud. History tells us when an instrument is unable to clear those hurdles; pressure remains down as the trend is down. Thus, ETH revisited the $1700 level one more time in July and, in addition to that, established a triple bottom. See figure 1 below.
It bottomed on July 20th at $1720 and staged a 17-day rally which brought it back above A) all its SMAs (including the 50d), B) the blue dotted downtrend line in place since May; C) back above “the Cloud.” Moreover, the daily Relative Strength Indicator (RSI) reached maximum overbought readings, while the Money Flow Indicator (MFI) closed well into the 80s. All are setups not seen since the correction from the $4400 all-time high (ATH) started, and thus the weight of the evidence suggests a new uptrend has begun.
Figure 1. ETH daily chart with EWP count and technical indicators.
The current rally is strong and looks impulsive
The first point I want to make is called “the traffic light.” It shows if the price is above the 10, 20, 50 and 200d SMAs (green arrow) or not (red arrow). When the traffic light is all red, ETH is below all its SMAs and in a downtrend: stop! Like it was in July. If it is above all its SMAs, ETH is in an uptrend: go! Like it is now. The traffic light helps me tell what the short- to long-term trends are, and if I should wear a Bullish or Bearish hat. A green traffic light tells me that the odds of good things, i.e., higher prices, are higher than during a red traffic light.
Besides, with price now back above “the Cloud” as well, these odds of “good things going to happen” have increased even more. Why? During the April to May ATH rally, the cryptocurrency was always above its 50d SMA and “the Cloud.” The current price action is developing a similar setup.
Based on the above and using the Elliott Wave Principle (EWP), I prefer to apply a bullish EWP count. Ideally, ETH bottomed for (blue) Primary wave-IV on July 20th, possibly already June 22nd, and should now be working on a few more minor 4th and 5th waves (green 5, red iii, iv) to complete a more extensive (black) major-1 wave of (blue) Primary-V. This wave-1 should ideally reach around $3000-3300, which aligns well with the triangle breakout target (blue arrows), followed by a wave-2 back to around $2500+/-100. A breakout back above the wave-1 high from those lower levels will then tell me wave-3 is underway. Ultimately, Primary-V should ideally target ~$9K.
Bottom line: For now, the focus is on the short-term to see if ETH can establish five waves up from its lows. It should not fall back below its Ichimoku cloud, nor its 200d SMA from current levels as that would -once again- severely damage the Bullish case. However, the current chart setup is much better than it was during late May and early July, and therefore, the Bulls have much better odds.
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