Bulls are expected to make their way towards Ether ($ETH) as technical analysts saw a positive prospect for the altcoin.
This was illustrated by the ‘DeMark’ Indicators that are popular amongst traders for assessing directional trend of the market.
These technical analysis indicators are known to mark turning points in the market, helping traders gauge potential inflection points in a trend.
On Monday, Fairlead Strategies’ Founder, Katie Stockton, called attention to a counter-trend buy signal that was flashed by DeMARK Analytics’ TD (Tom Demark) Sequential Indicator. It suggested that Ether could defend the weekly Ichimoku Cloud support at $1,580.
Ichimoku Cloud is a type of chart used in technical analysis to showcase support and resistance, momentum, and trend in one view.
At the time of press, $ETH was trading above this support at $1,590, up by over 1% in the last 24 hours. Stockton added: “A counter-trend ‘buy’ signal from the daily TD Sequential indicator suggests support [at $1,580] will hold, given the success of other recent ‘red 13’ signals.”
Specifically designed to anticipate turning points in the market, DeMark Indicators are used by many on the Bloomberg terminal. It was created by Tom DeMark where the strategy called a sequential finds an overextended price move, one that is likely to change direction and takes a countertrend position.
As laid out by the CMT Association, three conditions must be satisfied in order for the sequential indicator to flash a buy signal. First is ‘setup’ where there must be a decline of at least nine or more consecutive closes that are lower than the corresponding closes four days earlier. The setup must begin again if a day’s close is equal to or greater than the close four days before.
Second is ‘intersection’, where the high of any day on or after the eighth day of the setup must be greater than the low of any day three or more days earlier. This is to assure that prices are declining in an orderly fashion rather than plunging.
Third is ‘countdown’ which happens once the setup and intersection conditions have been satisfied. The number of days in which we close lower than the close two days ago (doesn’t need to be continuous) are counted.
A buy signal is generated only when the countdown reaches 13. If this is not the case, one of the following occurs:
a. There is a close that exceeds the highest intraday high that occurred during the setup stage.
b. A sell setup occurs (nine consecutive closes above the corresponding closes four days earlier).
c. Another buy setup occurs before the buy countdown is completed.
As of now, Ether has achieved the 13 count. However, this comes as some analysts worry the lack of activity on Ethereum may push its native token lower.
On the flip side, the MACD indicator, which gauges a trend’s strength, was also hinting a bearish reversal. This was noted as the MACD histograms were coloured red, risking a drop below the zero level on its chart.
While MACD’s positioning favours a downside break of the support at $1,580 which could pull the altcoin towards $1,350, Stockton believes this indicator’s bearish signal to be likely overshadowed by the bullish TD sequential. This is because the latter had correctly marked short-term trend reversals early this year.
