Is the Countertrend Rally for Ethereum Still on Track?

Two weeks ago, see here; I concluded for Ethereum (ETH, Ether), “With a 37% rally since the January 24 low, …, the countertrend rally should now be underway as long as that low holds. …. But this dead cat bounce is likely to be a somewhat overlapping affair, so I will have to track and monitor the price action judiciously … over the next several weeks to anticipate and mitigate as many surprises as possible.”

A month after the January 24 low and ETH topped at $3283 on February 10: a 52% (!) rally since the $2160 low made on January 24. However, over the last two weeks, ETH dropped back to today’s low at $2502. Thus, a valid question is if the “dead cat bounce” is already over? In today’s update, I am going to try to understand the short-term price action using the Elliott Wave Principle (EWP) so you can get a good idea of what I do daily for my premium crypto trading members.

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

Figure 1 above shows the daily chart for Ether. There are now enough waves to suggest that the first leg of the counter trend rally is complete (red, intermediate wave-a), and possibly the 2^nd leg (red wave-b into the green target zone) too. As such, a break back above $3190 means (red) wave-c to ideally $4230 is underway. Allow me to explain in more detail.

B-waves, B is for (dead cat) Bounce, always comprise three waves: a, b, c.

As my premium crypto trading members know, any 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).

Thus, this black wave-b will comprise three smaller waves: red (intermediate) waves a, b, and c. The recent 52% rally was IMHO red wave-a, the current decline into the ideal Fibonacci-based extension target zones (green box) intermediate wave-b, and now wave-c should commence soon. I already determined the green box last week, and now ETH is trying to put a bottom in it. So far, so good

In my last update, I mentioned, “How high the B-wave will travel exactly cannot be known with certainty… Once more price data becomes available, I can narrow the bounce target zone down. For now, a countertrend rally to around $4000+/-250 is preferred.” Now that I have two more weeks of price data available, and ETH has reached the ideal target zone for wave-b of wave-B, the ultimate target for this more significant bounce can be set at $3615-4310 (red box), with the upper end preferred. A break above last Tuesday’s high from around current levels will confirm this red, intermediate, wave-c (green dotted arrow).

Bottom line: In my last update, I stated, “… B-waves are price structures with potentially several hard-to-forecasting twists and turns. Why? Because B-waves comprise three waves themselves as well. Thus, although the upside target zone, for now, seems an easy call, the way to get there may be frustrating on a day-to-day basis.” With the rally into the February 10 high and the drop to today’s low, that indeed came to fruition.

Based on the price action since the January 24 low, I now prefer to narrow the B-wave bounce target zone to $3615-430, which is still very much the same as my January 20 call (!): “The weekly chart suggests wave-a down is, soon, complete and wave-b back up to ideally about $4250+/-250 should, soon, be underway.“