NOTE: ETH went up $8 since we began writing this post – that means divergences were right, right? 🙂
Should you buy ETH right now? How do YOU decide? Price? Potential for the technology? Those are useful, but can they tell you go BUY NOW? We’ll show you another way to decide called divergence, and, to us, it says BUY ETH NOW.
cryptopatterns offers an educational newsletter. If that education can produce profitable trades all the better. So, we’re going to introduce divergences using a real potential trade for ETH. You can then decide if you agree or disagree with our assessment, add it to your own research and trading strategy (you have one, right?), and hopefully, make the best possible trading decision if you are interested in trading ETH.
START WITH THE DEFINITION
The point where two things split off from each other is called a divergence.
So if we’re going to trade ETH using divergences we want to find a pattern, indicator or SOMETHING that is not consistent or has “split off” from the way things normally look when we review an ETH chart.
MULTIPLE TYPES OF DIVERGENCES – FINDING “WHAT DOESN’T FIT”
cryptopatterns studies dozens of indicators to “build our case” for buying or selling a cryptocurrency. When you’ve studied thousands of charts over 10 years, it becomes easier to pick up when one or more pieces of the puzzle just doesn’t fit. Here are a few examples for our potential ETH Trade:
Volume divergence is when there is a split off between price and volume. Here’s the details on the current ETH chart:
So, does volume divergence say to BUY ETH NOW? No, if anything, this volume divergence is a red flag to SELL ETH because
Price went UP
Volume went DOWN = BEARISH Volume Divergence
We want to see demand (volume) increase with price — something like this:
The bottom line is volume is generally not useful to tell you to BUY NOW — it’s a better tool for “confirmation” which is a different topic for a different post. We’re trying to decide if we should buy ETH now, so let’s look for other divergences.
This is when something happens that you don’t normally see in a proven price pattern — here’s an example from LTC that just happened yesterday:
In this example, pattern divergence does not tell us to BUY LTC now, instead it was a red flag to sell LTC (which we shared with subs) and reassess. So pattern divergence has great use and could be a buy or sell signal, but if we review ETH’s chart above, we don’t see any pattern divergence, so we have to look for other clues.
If you’re new to trading, you’re likely overwhelmed by the endless options to draw lines, channels, and do statistical analysis on charts using dozens of indicators offered by the exchange you trade on — don’t worry, we are too. Here’s a quick example from Bittrex Exchange:
You don’t have to understand every indicator to use one or more effectively. However, it is worth your time to learn a few of them and understand how to use them in your trading decisions. We’ll show you one for ETH we’ve used successfully called the MACD (read all about it and how it works HERE)
This set up where price is HIGHER and indicators are LOWER is called BULLISH DIVERGENCE. Why bullish?
In order to correct this divergence one of two things has to happen:
- Price has to go HIGHER to pull the indicator higher OR
- Price has to drop A LOT (like to $214 range!)
Either of these moves will get price and indicator back “in sync” — which if you study charts you will see they are in sync most of the time.
TIME TO BUY ETH NOW? CAN’T TRADE ON DIVERGENCES ALONE!!!!
What is ETH’s indicator divergence telling us? It’s saying there’s a bullish edge in probabilities because that indicator is really low and there’s a better chance of it moving up than down right now–and what makes the MACD go up?
INCREASE IN PRICE = BUY ETH NOW!
WARNING: BEFORE YOU TRADE ANYTHING PLEASE UNDERSTAND: NOTHING WORKS EVERY TIME, AND WE ARE IN A VERY VOLATILE AND UNCERTAIN PHASE IN TODAY’S TRADING ENVIRONMENT.
As you can see above, divergences guarantee nothing — ETH could tank and wipe out the bullish divergence — and then there’s the setttings of the MACD which you can manipulate, then there’s the time frame, divergences often read differently on the 30 minute vs the 1 hour vs 2 hour vs 4 hour vs Daily charts. There’s a lot to learn about divergences, but they are an incredibly useful tool as a PART of an overall trading strategy.
That’s where so many other patterns, indicators and targets can be used as CONFIRMATION of divergence to make better trading decisions. And that’s EXACTLY what we do every day for our subscribers at
We use every type of divergence imaginable, watch all the patterns and indicators, and share our research so traders can see our take on the probabilities as well as LEARN HOW TO DO THEIR OWN — this offers a great edge in probabilities for trading and investing in their short term, intermediate term and long term cryptocurrency trades.
SOOOO — SHOULD YOU BUY ETH NOW?
Only you can decide, and even if divergences make it a screaming buy, the bigger question is WHAT IS YOUR TRADING STRATEGY? How long do you plan to hold? What’s your price target? What’s your exit strategy? Check our education category for more free posts on many of these subjects, and watch for more to come.
This site is for informational and entertainment purposes only and not in any way intended to be investment or trading advice. You are 100% responsible for your financial decisions at all times. It is highly recommended you DO NOT make any investment or trading decisions depending upon what you read on this blog/newsletter!