Ethereum Classic ETC/USD was trading down about 2% on Monday in a continued consolidation pattern after soaring 117% higher between March 14 and March 22.
The rise higher, paired with the long period of consolidation, has settled Ethereum Classic into a possible bull flag pattern on the weekly chart.
The bull flag pattern is created with a sharp rise higher forming the pole, which is then followed by a consolidation pattern that brings the stock lower between a channel with parallel lines, or into a tightening triangle pattern.
- For bearish traders, the “trend is your friend” (until it’s not) and the stock may continue downwards within the following channel for a short period of time. Aggressive traders may decide to short the stock at the upper trendline and exit the trade at the lower trendline.
- Bullish traders will want to watch for a break up from the upper descending trendline of the flag formation, on high volume, for an entry. When a stock breaks up from a bull flag pattern, the measured move higher is equal to the length of the pole and should be added to the lowest price within the flag.
A bull flag is negated when a stock closes a trading day below the lower trendline of the flag pattern, or if the flag falls more than 50% down the length of the pole.
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The Ethereum Classic Chart: Ethereum Classic may be settling into a bull flag pattern on the weekly chart, with the pole formed between the weeks beginning March 14 and March 21 and the flag forming over the weeks that have followed. If the pattern is recognized, the measured move indicates Ethereum could trade up over the $90 level.
- On the daily chart, Ethereum Classic is trading in a falling channel (the flag on the weekly chart), creating a series of lower highs and lower lows. This pattern is considered to be bearish until a stock or crypto breaks up bullishly from the upper descending trendline of the pattern on higher-than-average volume.
- A break up from the falling channel on the daily chart will also constitute a break up from the bull flag on the weekly chart. Bullish traders may choose to wait for a break up from the patterns before entering into a position, while bearish traders may choose to take a short position at the upper trendline of the patterns, with a stop set on a breach of the upper trendline.
- The downward sloping consolidation within the channel and flag has helped to cool Ethereum Classic’s relative strength index, which was measuring in at about 86% on March 22. The crypto’s RSI is now registering in at about 57%.
- The move lower on Monday was on lower-than-average volume, which indicates consolidation as opposed to a large number of traders selling out of fear. By midafternoon Ethereum Classic’s volume was measuring in at about 278,000 compared to the 10-day average of 402,237.
- Ethereum Classic has resistance above at $47.93 and $50.74 and support below at $44.66 and $41.41.
Photo: Courtesy of ETC on Flickr