A Majorly Bullish Ethereum Setup Right Now

May 29, 2023

IN TODAY’S LETTER

What we cover: Ethereum finally rallied higher for four straight days to close at a 20+ day high. How has Ether performed historically when it closes higher for 4 straight days, closed at a 20-day high while also above its 100ma? Ether Challenges the Upper Boundary of its Bull Flag Pattern.

TODAY’S STATS

Ether Closes at a 20-day High and the Results are Highly Bullish

After narrowly ranging sideways just above its rising 100ma, Ethereum finally rallied higher for four straight days to close at a 20+ day high. While Ether remains in the downward channel established after its bullish March rally - more on this later - the four-day surge to the upside is a welcome relief as some traders had previously questioned the ability of ETH to hold above its 100ma. Today we’ll look at how Ether has performed when the current setup has occurred in the past. Let’s get to the stats!

`ETHEREUM (ETH/USD). Daily Chart with 100ma.`

Our first query is simple: how has Ether performed historically when it closes higher for 4 straight days, closed at a 20-day high while also above its 100ma? We’ll first look at a simple “sell 90 days later” scenario before looking at various holding times.

OUR ETHEREUM QUERY'S SETUP CONDITIONS:

CONDITION 1: Ether closes higher for 4 days straight
CONDITION 2: Ether closes at a 20-day high
CONDITION 3: Ether closes above its 100-day moving average


ENTRY AND EXIT CONDITIONS:

1. ENTRY CONDITION: Enter long ("buy") at the open of the next daily candle
2. EXIT CONDITION: Exit ("sell") 90 days later

Here are the results using a 90-day hold:

`ETHEREUM (ETH/USD). Query Results for ETH with a 90-day Hold. Inception-Now.`

Using a 90-day hold, the nineteen historical occurrences have been profitable a more than solid 68.4% of the time. While the worst hypothetical trade is steep at -66.3% (June 2022), it occurred during a vicious bear market, just as the second worst trade of -47.52% did (August 2018). On the flip side, the average trade of +113% is helped by Ether’s best trade of +1155.7% which occurred early in Ethereum’s history (March 2016). The excellent Profit Factor of 10.30 indicates that the sum of all hypothetical gains is over 10 times the sum of all hypothetical losses - an exemplary figure especially with this many instances. Perhaps most interesting, and as we’ve seen with several studies lately (many occurring in Bitcoin), Ether has more than doubled in 3 months on average following closes at 20-day highs which take place above the 100-day moving average after four straight days up.

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Now let’s look at Ether’s results for average gain and average loss across various holding times ranging from 7-days to a year using data from inception-now. Note that the Win % shows how many trades were profitable, hypothetically speaking.

`ETHEREUM (ETH/USD). Hold Time Results for Today’s Conditions. Inception-Now.`

The short-term performance of hypothetical hold times ranging from 7 days through 60 days has been stellar, with average gains easily exceeding average losses across the board, and winning percentages over 50%. During the same time range, no average loss exceeds -24% (although some individual losses do, of course). Longer hold times from 90 days through one year have see stunning gains historically, but also some troublingly high average losses. Happily, with the Win % rising steadily from a 90-day hold through 365 days, these losses are less common.

THE TECHNICAL VIEW

Ether Challenges the Upper Boundary of its Bull Flag Pattern

While we’ve often stressed the intermediate-term outlook in our Technical View, and obstacles still remain (see our last letter of Thursday 5/25/23 ), we’ll focus on the short-term as Ether’s most recent rally has brought it up against the bull flag’s upper boundary where it has stalled so far in today’s trading. While ETH still remains inside the pattern, the challenge to the boundary appears significant from a short-term perspective, especially on the eve of the potential passage of a bipartisan debt ceiling agreement to be voted on Wednesday. It’s another swing of the wrecking ball and a breakthrough would be highly bullish as well as in sync with the stats for today’s technical setup. As always, we’ll alert you here if we get a breakout in the coming sessions.

`ETHEREUM (ETH/USD). Daily Chart with 100ma and bull flag pattern.`

THE TLDR

A Few Key Takeaways

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✔ Ether has more than doubled in 3 months on average following today's conditions
✔ Longer hold times from 90 days through one year have see stunning gains historically, but also some troublingly high average losses
✔ Ether’s most recent rally has brought it up against the bull flag’s upper boundary
✔ The bipartisan debt ceiling agreement will be voted on this Wednesday

peace_love_crypto

-DB

IMPORTANT DISCLAIMER

The information presented and made available in this newsletter is intended for educational purposes only. THE INFORMATION IS NOT AND SHOULD NOT BE CONFUSED WITH INVESTMENT ADVICE AND DOES NOT ATTEMPT OR CLAIM TO BE A COMPLETE DESCRIPTION OF ANY SPECIFIC COINS, TOKENS OR MARKETS OF ANY KIND, BUT RATHER EDUCATIONAL EXAMPLES OF THE APPLICATION OF TECHNICAL ANALYSIS AND QUANTITATIVE ANALYSIS TO THE MARKET. This information has been presented and prepared without regard to any particular person's investment objectives, financial situation and particular needs because as individuals come from diverse backgrounds, with diverse objectives and financial situations. This information is of a general nature only so you should seek advice from your investment advisor or other financial professional as appropriate before taking any action. The opinions and analyses included herein are based on sources and data believed to be reliable and are presented in good faith, however no representation or warranty, expressed or implied is made as to their completeness or accuracy. It is imperative to understand your investment risks since all stock investments involve significant risk. The user of REKTelligence’s newsletters, podcasts, courses, coaching and other educational services agrees to indemnify and hold harmless REKTelligence LLC from and against any and all liabilities, expenses (including attorney's fees), and damages arising out of claims resulting from the use of this educational content. REKTelligence LLC is not a licensed investment advisor.