Ethereum’s Counter-trend Rally Finally got Underway: How High Can It Fly?

Price Action Recap

Unfortunately, it has been over a month since I last provided an Elliott Wave Principle (EWP) based update. See here. Hence, whereas my premium crypto trading members have been kept abreast of Ethereum’s (ETH) progress, it is time for a public update. I have been tracking this B-wave/Bounce scenario since at least January, see here, and thus the current price action is not a real surprise. But what has happened since late February?

I was looking for a “b-wave” low between ~$2700-2400 and then a rally to $3615-4310. ETH spiked down to $2302 on February 24 but closed that day at $2598 and is now trading in the $3400s. Thus, although I missed the absolute low by ~$100 (4.2%), the overall path has been filling in nicely. That is the power of the EWP. It is, therefore, suitable to repeat that

“correction always consists of at least three Elliott waves: wave-a, wave-b, and wave-c. Sometimes more, but never less. In this case, we are looking at a countertrend rally, i.e., corrective rally/dead cat bounce (black wave-b in Figure 1), of the November through January decline before the next leg lower starts (black wave-c).”

Figure 1. ETH daily chart with EWP count and technical indicators.

Technical Analysis

B-waves, B is for (dead cat) Bounce, Should Ideally Target $3680-4230

Figure 1 above shows the daily chart for Ether. There are now enough waves to tell the first and second leg of the countertrend rally are complete (red, intermediate wave-a and -b), and the 3^rd leg (red wave-c into the red target zone) is now underway. Namely, as I stated last, “… a break back above $3190 means (red) wave-c to ideally $4230 is underway.” The breakout happened a few days ago, and ETH has already reached the ideal (green) c-wave target zone and the lower end of the ideal red- and black target zones. Thus the recent rally can be considered “good enough,” but the Technical Indicators (TIs) want more. Namely,

• The Relative Strength Indicator (RSI14) has not been this high since August, September. Back then, ETH experienced a pullback before moving higher.
• The MACD is firmly pointing high and positive, similar to July-August and October last year.
• The Money Flow Indicator (MFI14) is very overbought, similar to August last year. Liquidity drives markets higher, but at this stage, it is a bit of a “too much of a good thing”, i.e., everyone has bought ETH. Hence, like the summer of 2020, one should expect a pullback before ETH moves higher again into the ideal red- and black target zones. Think $3700-4000.

Price Forecast

I have anticipated a countertrend rally in ETH since late January to “ideally about $4250+/-250.” I expected this rally to get going earlier, but the market decided to take its sweet time. It happens as I do not control the markets. If anything, this teaches us to remain patient, zoom out and see the forest through the trees. Although my call for a low around $2700-2400 was off by $100, the ensuing rally to $3615-4310 I had anticipated has now come to fruition. Shorter-term, the EWP count and technical indicators suggest ETH should take a breather before moving higher again as long as $3065 holds as support.