Break-Out: Another Crazy Rally in Ethereum?

What crazy rally you might ask? Bitcoin is the star, right? Everything was about BTC (and BCH) in the last few months, and lots of traders forget the gains that ETH posted amid the take-off of the ICO Rocket during the spring.

Comparing ETH and BTC in 2017

By the numbers, out of the two largest coins, 2017 is still the year of Ethereum as the 3600% rise in the token’s price dwarfs Bitcoin’s impressive 630% gain. Could Ethereum be on the verge of another epic surge? Before answering that question, first let’s see what happened with the coin in recent months.

How Did We Get Here?

ETH/USD, Daily Chart Analysis

Ethereum finally broke above the magical $400 barrier that has kept a lid on the token’s price for five months after the crazy run-up in May. What first followed after that stellar move, was a 70% decline top-to-bottom, with a flush-out panic low in July.

Our trend model turned long-term positive even before the spike lower, but since then, the coin only managed to get close to the all-time highs, while Bitcoin eclipsed the previous star with its dominant performance. Now the tide might be turning, as ETH is finally gathering bullish momentum and today it breached the $400 mark, flirting with a break-out from the giant triangle consolidation pattern.

Fundamentals vs. Technicals

Fundamentally speaking, a lot of positive and negative catalysts could be cited from the past 5 months, (regulation issues, Chinese ICO ban, record inflows in the segment, new waves of adoption, the successful updates and so on…) but from a birds-eye perspective the Ethereum ecosystem is expanding, the segment is at all-time highs regarding market capitalization, and the major coins are all in uptrends, so, for now, bulls are firmly in charge.

With all that in mind, technicals might be more useful at this point to judge the prospects of an Ethereum break-out. Firstly, although the coin is not overbought yet, long-term investors should already be sitting on decent profits since the major correction in June-July, and a break-out to new record highs is rarely the optimal entry point.

That said, after such a huge consolidation phase, the coin might be ready for a major rally, after the break-out that Rakesh correctly predicted, with great trading opportunities, and plenty of time to reduce exposure as the currency heads towards an overbought stance.

What Could Lie Ahead?

Projecting the consolidation-range is a great tool for setting up targets for a break-out, and the Fibonacci extensions serve as our primary goals for the next period. The initial target according to the extensions would be the $470-$475 range, while longer-term targets are at $512, $575, and finally near $680, the full range projection target.

All that said, we would be surprised if ETH would tackle the psychologically important $500 level without substantial resistance, and of course, the success of the current break-out move is not carved in stone either, so traders should always use stop-loss levels, $380 and $350 supports look optimal depending on the position-sizes. Long-term Investors should be already looking at exit levels to sell portions of their positions and prepare for the next major correction to load up again.

To answer the question in the title, we honestly don’t know, but the long-term prospects of Ethereum are bright and the current setup could very well lead to a runaway move, not unlike Bitcoin’s recent surge, and we still wouldn’t dare shorting this bull market.

Featured image from Shutterstock

Disclaimer:  The analyst owns cryptocurrencies. He holds investment positions in the coins, but doesn’t engage in short-term or day-trading, nor does he hold short positions on any of the coins.

Trader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.