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ETH Price Analysis: Breaking Support

Distributed Summary:

  • Ether broke support earlier this week on expanding volume and expanding spread
  • Because the support break is on the heels of a prolonged consolidation, it is likely that the downward move will continue to test support in the $90 range
  • If the $90 range doesn’t hold, we will most likely see a retest of the established lows in the mid-$80s

In the early hours of the morning yesterday, around the time of the London Open (8:00 a.m. GMT), ETH finally managed to break its long held support on expanding volume and expanding spread. Yesterday’s daily candle closed a new low and has continued to bleed throughout the day:

Figure 1

Figure 1: ETH-USD, Daily Candles, Broken Support on Expanding Volume and Spread

Leading into the prior consolidation, ETH-USD saw a large, impulsive move (23 percent, in fact) through its previously respected support in the $150s. And now, after weeks of consolidation, ether has once again failed to maintain support, leaving very little room for demand to step in. The failed consolidation represents a failure of the bulls to control the price level and an overwhelming amount of supply still present in the market:

Figure 2

Figure 2: ETH-USD, Daily Candles, Failed Consolidation Range

This downward continuation isn’t entirely surprising. Weeks ago, after topping in the mid-$160s, we saw a very strong rejection of history and prior support levels (outlined by the blue and pink arrows below):

Figure 3

Figure 3: ETH-USD, Weekly Candles, Support Turned Resistance
The importance of these levels can’t be overstated. The rejection of those weekly support levels that are now resistance is a sign of a continuation of the trend. If we look at the supply and demand channel (S/D channel) shown above, we can see a clearly overbought market right at the same time it failed to break above the overhanging resistance. The rejection of that resistance has us now testing lower lows with our first target on the midline of the S/D channel in the upper-$90s. If that support level fails to hold, we can expect to see a retest of the prior lows in the mid-$80s. From there we will have to reassess and see how the macro markets react to the support test.

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