Technical Analysis and Market Entry: Ethereum (ETH/USD) Bull Flag Breakout Leads to Retest

  • The Ethereum (ETH) price is cooling somewhat after the aggressive breakout higher over the weekend.
  • ETH/USD was moving within a bullish flag formation, which the buyers managed to force a chunky breakout to the upside.
    Buying attraction has increased, in line with the previous Ethereum article, given the technical set up.

The Ethereum price saw a buying frenzy over the weekend, as a strong wave of buying pressure came into play. ETH jumped to the highest level seen since 18th August 2018, a time when it was consolidating ahead of a resumed move south. On this occasion, the price is in full gear recovery mode, without a sign of slowdown for now.

In terms of the break north, it came after a prolonged period of consolidation. ETH/USD was trading sideways since 17th May, following a significant move higher earlier in the month. A decent amount of upside momentum was observed from the start of May; it jumped some 76%. The rally at this stage in the month saw the forming of a pole structure, which was then complemented by a narrowing in range (i.e., the flag pattern).

ETH/USD daily chart.

Progress on Istanbul Hard Fork

Late last week, the Ethereum development team had their bi-weekly call, in which some progress was detailed regarding an upcoming hard fork, Istanbul. The team managed to approve two Ethereum Improvement Proposals (EIPs) for this noted upgrade. Istanbul is at present being aimed for activation on the Ethereum mainnet in October.

The first EIP is 2024 or 131 (numbered differently in some documentation). The node is going to be adding a fresh precompile to the Ethereum digital machine. These precompiles are referred to as costly operations within the Ethereum blockchain, which deploy for a fixed or gas cost. EIP 1702 is the second node, and Wei Tang from Parity Technologies proposed it. The node is set to enhance smart contracting in the Ethereum network.

Trade Recommendation

Given the detailed technical set up completing a breakout, buying attraction has increased. ETH/USD at the time of writing has settled within a known significant area of supply. The zone can be observed running from $300 up to $320, where the price was last having some difficulty in August 2018. If the current daily candlestick can settle within this zone, then buying could pick up some pace.

Another more attractive area of entry would be once a retest of the flag has been completed. It would mean playing out to the textbook with the breakout and then retest, inviting further buying momentum. The entry would be around $280-$270; the price needs to hold on the daily above the structure.

Furthermore, in terms of targets of interest to the upside, $400-$420 and then $500 within the near-term are eyed. Stops upon entry within both noted areas would be placed around $255, leaving enough breathing room just below the upper trend line of the flag.

Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Ken has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.