Ethereum Classic ETC/USD was trading about 5% lower on Sunday after breaking down bearishly from a quadruple inside bar pattern on the daily chart. The break came on lower-than-average volume, however, which indicates the inside bars may not be the dominant pattern.
Instead, Ethereum Classic could be setting up a bull flag pattern, and if the pattern is recognized a massive move to the upside could be in the cards.
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.
- 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.
The Ethereum Classic Chart: If Ethereum Classic is settling into a bull flag pattern, the measured move on a break from the formation is a massive 116%, which indicates the crypto could skyrocket up toward the $98 level. Traders and investors can watch for an upward break from the upper descending trendline of the flag formation on higher-than-average volume to indicate whether the bull flag pattern is recognized.
- The sideways consolidation within the flag pattern has helped Ethereum Classic’s eight-day exponential moving average (EMA) to catch up to the crypto’s price. Ethereum Classic may find support at the eight-day EMA, but if the crypto falls below the level, there is further support at the 200-day simple moving average. If Ethereum Classic were to close a 24-hour trading session below the 200-day SMA, it would most likely negate the bull flag pattern.
- The move lower on Sunday was on far lower-than-average volume, which further confirms the sell-off is due to healthy consolidation as opposed to a mass exodus of sellers. By early afternoon, the crypto’s volume was measuring in at just 159,294 compared to the 10-day average of 832,082.
- Ethereum Classic has resistance above at $47.92 and $50.74 and support below at $44.66 and $41.41.
Photo: Courtesy of ETC on Flickr
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