ETHUSD Renko Analysis
There is an interesting level for the ETHUSD pair. But before that, a quick review of Renko bars because many traders are not familiar with this alternate form of charting.
Renko bricks are similar to traditional candlesticks and heiken-ashi candlesticks, except that time is not involved in the calculation, only price. Renko bricks only form when price has filled a certain identified amount. For example, on this Etherium/USD pair, I have set the brick size to 5. So a brick will only form when 5 points have formed; open price at 300 closes and forms a brick when price reaches 305. Renko charts filter out a lot of noise and focus only on price. For traders who like to use their own support and resistance lines, one can easily see how superior and cleaner Renko charts are for that purpose. Additionally, it makes seeing various other patterns so simple, that you may not need to draw them and clutter your charts.
- These horizontal lines represent natural and constant harmonic levels. While they may appear to behave like support and resistance zones, the importance of them is more cyclical and psychological than purely technical. Where price is currently at, we are testing a strong harmonic rejection level, which is right above major harmonic level. Take special note of the volume of each Renko brick and the proximity of the bricks to these lines. We also have some noticeable divergence in price and the oscillator. A quick look at the oscillator shows the CMI (Composite Momentum Index) turning down towards the first overbought line.
- This volume bar is important. On this Renko chart and for the entire history of this pair, this is the highest volume bar in the history of the ETHUSD pair. Because we have a bearish Renko brick following an uptrend in Renko bricks, and there is right on a strong harmonic rejection level, we can anticipate some bearish reaction at this level. Also, see the image below.
- This represents our Volume Area and VPOC (Volume Point of Control). This thin red line can often be treated as a magnet of sorts, it’s a mean area that price likes to trade around, but not very far from. It should take significant fighting between bulls and bears to form a change in this area.
Things to watch for:
- Watch for a test of the most recent swing high at 335. If there is a signficant move to that level without a concercerted effort by sellers, expect price to move to the next area of least resistance: 343.75
- If we get the formation of another bearish Renko brick at the current price, we can rely on high probabilities for price testing the 312.5 level which is now a support level that has yet to be tested. It is uncommon for price to move through a major harmonic line without testing it at least once.
- 303.18 is the current VPOC, so we should expect some strong support at this level if price does reach it.
- Elliot Wave practitioners may consider a 1,2,3,4,5 to be completed here (image below), which in conjunction with the Renko brick change and the current resistance level, provides more bias for a bearish direction.
- While there is a strong confluence of bearish signals to form a bearish bias, be very vigilent to a break of the 335 area, this would be a strong rejection of the bearish confluence.