The Ethereum price has been decreasing since reaching a high of $198 on October 11, 2019. Additionally, it has created a very clearly-defined pattern — since it is trading inside a descending parallel channel.
The tweet below was posted by cryptocurrency trader Dmitry Crypto, who suggests initiating a short for Ethereum at current prices.
Don’t short usually, but this looks too juicy to miss.
— Dmitry Crypto (@Dmitry_Dima) October 20, 2019
The trade in question has an entry point of $176, a stop loss of $179, and a target of $166.
Let’s look at price movement closely and determine if this is an optimal trade to initiate at the current time.
Ethereum’s Short-Term Channel
Since October 10, Ethereum has been trading inside of a descending channel.
At the time of writing, the Ethreum price was trading right on the resistance line of this pattern.
Also, the 100- and 200- period MAs have made a bearish cross.
The 200-period MA previously served as support and has been very reactive to price movement.
It currently is at $180, so that may be an optimal place to put a stop loss — instead of $179, as suggested in the tweet.
However, looking at the longer-term, we can see that Ethereum has been trading inside of a descending wedge since June 26.
At the time of writing, it was also at the resistance line of this wedge.
Additionally, the 100- and 200-day MAs have made a bearish cross and are offering resistance to the price.
Since both resistance lines coincide with each other, a much more profitable trade can be initiated using the descending wedge.
An entry point of $177 with a stop loss at $181.5 and a target around $140 would give a nearly 10:1 R:R ratio, as opposed to the 3:1 in the descending channel.
While we are not recommending that a short be initiated, in this case, the R:R using the long-term pattern is much larger than using the short-term one — even if the stop losses are placed at very similar levels.
Do you think Ethereum will increase above $180? Let us know in the comments below.
[Disclaimer: This article is not trading advice and should not be construed as such. Always consult a trained financial professional before investing in cryptocurrencies, as the market is particularly volatile.]
Images courtesy of Twitter, TradingView.