Ethereum (ETH) bulls are on the verge of ceding control to the bears. Will the bears be the one putting up the fight? I don’t think so. I think it is the market makers that are going to tip the balance in favor of the bears because it is in their interest to do that this time. The market makers in this market seem to have broken all records of manipulation. I have traded penny stocks for years but never in my life have I seen such naked manipulation. Those of us that have been following the market for the past twelve months might be able to recall how the price shot up through strong resistance zones like knife through butter with the sole intent to hunt the bears. The bulls celebrated the move and they even implicitly supported this manipulation because it served their purpose.
However, things do not take long to change in this market and if we take a look at the daily chart for ETHUSDLongs, we can see that the bulls are now at a point where the market makers are tempted to take their money. ETHUSDLongs has already broken below a key trend line support and is now hanging by a thread as it rests atop the 38.2% fib extension level. Just as a large majority of bears entered aggressive shorts when the price started to decline, the bulls have added aggressive longs as the price started to rise. The difference between the bulls and the bears is that the bears are often more experienced. In most financial markets, the majority of the bears are better traders than the majority of the bulls. This means that the bulls are likely to suffer more when the market goes against them.
If we take a look at the 4H chart for ETH/USD, the wedge seen on this chart looks a lot similar to the one we saw in December, 2018 which was followed by a massive parabolic uptrend. Before we jump to conclusions, we need to realize that there is a reason this has happened. The market makers know that people will start comparing this to the December, 2018 fractal and they would assume that the same thing is going to happen again. I’m not saying that could not happen again. It might every well happen again for all we know. However, the mistake that most traders make with technical analysis is that they see the chart as just lines and patterns.
There are a lot of people in the world who can draw these lines and patterns. There are robots that can do it a lot better than us. Then why is it that most brokers have a disclaimer on their website saying “70% of traders lose money”? This is because most people can see these lines and patterns but they cannot interpret what they mean. The reason most professional traders can just look at the price action (without the need for any fancy indicators) and still make consistent profits is because they understand the meaning and the intent behind every move. The same thing is at play in Ethereum (ETH) and if you are not a professional trader, you may still be able to trade this move by waiting for the breakout first instead of rushing into the trade.