Frying pan bottom in Ethereum

Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency. Please read the full London CryptoCurrency Show disclaimer HERE

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One of the most popular tools in technical analysis is candlestick charting. They were actually invented by a Japanese rice trader in the 18th century, Munehisa Homma. All charting or technical analysis is based on pattern recognition. If there has been a recurring reaction following a particular chart pattern, it is assumed that there is a strong likelihood of this occurring again. After all, chart data is just a record of human behaviour in any given situation.

Not only are candlesticks visually easy to read, Munehisa gave many shapes names in order to remember them more easily. Named after Venus and Mercury we have morning and evening stars. The morning star is the last star in the night sky before daylight comes and as such is bullish, indicating that we are to expect a period of bright skies. The opposite is the evening star which is the first star to appear before the darkness of night time. Some patterns have even more ominous names such as an abandoned baby. Needless to say this forewarns of sad times ahead.

Not all pattern names are so sad as an abandoned baby, and one of those Is what we seem to be building in Ethereum right now. The move down from the 6th of March is seen as the frying pan handle and the rounding off we are witnessing right now is seen as the rounded bottom of the pan. We also have some bullish divergence on the relative strength index. This is when the market makes a new low but the RSI at the bottom of the chart actually goes in the other direction.

It seems as if the recent G20 statement that crypto currencies do not pose a risk to global financial stability is finally sinking in. Markets do not like speculation and although there will be increased regulation going forward, it would appear that even G20 now agree that this is a stable product with an ever increasing part to play in the financial infrastructure.

Has Ethereum hammered out a bottom?

In recent weeks Ethereum has been on what seems like a relentless slide. It's hard to comprehend that only two months ago the price was trading two and a half times higher. However, during this sell off it was noticeable that the daily volumes remained fairly light suggesting two things. Firstly investors seemed to be, I wouldn't say happy but, prepared to hold onto their coins for the long term. The second thing to note is that this suggested we had not reached a level of perceived good value, or bargain territory. If we go back to the last very high volume day, which was the beginning of the rally back on the 11th of December last year, we can see that this began at the $518 level. So this is where we were looking for investors to wake up again. This is exactly what we have seen over the weekend, and despite spiking down to a low of $ 450, we actually closed all the way back up at $ 538 leaving us with a hammer candlestick.

Ethereum daily chart and a closeup of yesterday's hammer.

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There are many reversal signals in candlestick charting and a hammer is one of those. What Chartists look for is a small bodied candle (the coloured part which is the difference between the open and the close) that appears at, or near the top of the days range. This is the head of the hammer! They also look for a long lower wick (the thin line showing how low we traded that day). This forms the handle and it is said that the market is hammering out the bottom of the bear move. As with many candlestick formations confirmation is required to increase the potency of the signal. Traders say "To do this we would now need to see a green candle with a closing price above $575. Even so, the pick up in volume, coupled with the Relative Strength being in oversold territory, suggests there is good reason for hope in this market"

Techs for Techs

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The interest in the crypto markets by the old school of traders is increasing by the day. We are hearing about tried and tested systems beginning to be employed, such as cross exchange arbitrage opportunities, or the spread differential between Bitcoin and Ethereum. But the biggest explosion of interest at the moment is from Chartists, or Technical analysts, or techs as they like to be called.

With most of the ICO's coming to market being from the tech industry, one wonders who has the biggest claim to the abbreviation, technology specialists or technical analysts?

Regardless of who wins they both have their place but there is much talk amongst the Chartists at the moment about a key support level in Ethereum, so here's a brief explanation of what is being said.

The support comes in at $518 in US dollar terms and relates to the first breakout rally back on December 11th. On that particular day the market closed at $518. The following day the market opened at that exact same price and began a spectacular rally. Those few days also saw the biggest volumes we have seen in this market and they have not yet been matched, even in the recent panic selling. Ethereum is putting up a defence at current levels, just above $600, but needs to do more to calm the nerves.

One thing is for sure, one could expect plenty of activity should we take a look at this 518 level, but I suspect there will be plenty of buyers waiting in the wings before hand.

Ethereum trading

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Ethereum is at a level where the bulls, (buyers) need to start showing their intentions to defend. Back on the 11th of December 2017 we saw a positive trading day closing the session at USD 518.00. The following day we opened at that exact price and saw the highest volumes yet traded in this crypto as the big rally began. (See arrow on chart) Although we have suffered from the recent sell off, the volumes have been quite small in comparison.

This could mean that the owners of this product are comfortable riding the storm or maybe there is a big test of nerves in the offing at $518!!!

The last time we saw any reaction from the bulls was on the 6th of February recovering from a low of Usd 545, so this could still do a job again as support. It will be interesting to watch volumes closely over the next few days! Traders are saying "a big jump in activity before reaching $518 would be a good thing. However, If we were to breach the $518 level it would not paint a pretty picture technically."

Frying pan bottom in Ethereum

Has Ethereum hammered out a bottom?

Techs for Techs

Ethereum trading

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