I do hope Monday wasn't a one-day wonder.
The best pops often come in the midst of a vicious bear market or during sharp downtrends. Buyers appear to be shaking off that early morning weakness. The Dow is even green, but I'm not concerned with the Dow. Watching the Nasdaq and Russell 2000 both come well off the lows for the day does give me some hope.
Between the big drop and recovery Monday, plus a good-sized drop and moderate recovery Tuesday, I get the feeling sellers are simply exhausted. Shorts are willing to take a wait-and-see approach into Wednesday, possibly through Thursday, but the last little selloff here hurts the feelings we may be all clear. To make matters worse, we're now entering the meaty part of earnings season, especially in tech.
I mentioned ethereum as a play, and I still see it as one. I'm looking at the Grayscale Ethereum Trust ( ETHE) here as a possible one-week swing. The security saw a similar reversal to what we experienced in equities yesterday. The long candle with a bottom at $17, which was basically the open and the low, followed by a sharp recovery. This $17 level gives us a clear stop to use on a closing basis. Given the volatility around crypto, traders might be inclined to give it a little extra room intraday.
Today provided some much needed follow-through. Again, we saw a push lower, but this was scooped up quickly.
We have a bit of a doji pattern after closing at the same spot as our open. Normally, this signifies a change in pattern, but after only a one day bounce, I don't see a pattern for a reversal lower in place based on this candle. Both the 21-day simple moving average (SMA) and 50-day SMA are far above the current prices. The first clear resistance on the chart sits around $24. There is the gap from a few days ago that could cause a little trouble. Ethereum trades around the clock though, so the gap isn't quite as meaningful on this chart. We don't have a ton of secondary indicators supporting us but the bullish crossover while in oversold territory has been a good one on ETHE, which makes me a buyer.
Buy to open ETHE at $20 or lower