ethereum has formed a “golden cross” pattern in the 1-week period, marking the second such signal this year. While the long-term implications could be very positive if history repeats itself, there are reasons to temper expectations.
A weekly golden cross has formed | ETHUSD on TradingView.com
ethereum Golden Cross and a possible target for new ATHs
1W ETHUSD has formed a golden cross for the second time in 2023. A golden cross is a buy signal in moving average-based trading systems. It suggests that the trend is moving in an upward direction and since trends tend to persist, this is notable.
The golden signal occurs when a short-term moving average (the 50-week moving average) crosses a longer-term moving average (the 200-week moving average) from below. A death cross is formed when the opposite happens.
The last confirmed gold cross for ethereum in December 2020 preceded a massive 600% rally over the following year to the asset’s all-time high near $4,900. A repeat move of similar magnitude this time would put ethereum above $12,000, more than six times the current price of around $2,000.
However, it is important to note that not all golden crosses lead to the anticipated upside. In 2023 alone, 1W ETHUSD has crossed the death and golden cross twice, demonstrating how moving average-based systems are prone to swings without an established trend to follow.
<img loading="lazy" decoding="async" class="size-large wp-image-563083 aligncenter" src="https://technicalterrence.com/wp-content/uploads/2023/11/1701281700_229_A-golden-opportunity-for-Ethereum-600-return-of-buy-signal.jpg" alt="ethereum ADX” width=”860″ height=”505″ srcset=”https://www.newsbtc.com/wp-content/uploads/2023/11/2023-11-29-12.03.05.jpg?w=1280 1280w, https://www.newsbtc.com/wp-content/uploads/2023/11/2023-11-29-12.03.05.jpg?w=460 460w, https://www.newsbtc.com/wp-content/uploads/2023/11/2023-11-29-12.03.05.jpg?w=768 768w, https://technicalterrence.com/wp-content/uploads/2023/11/1701281700_229_A-golden-opportunity-for-Ethereum-600-return-of-buy-signal.jpg 860w, https://www.newsbtc.com/wp-content/uploads/2023/11/2023-11-29-12.03.05.jpg?w=750 750w, https://www.newsbtc.com/wp-content/uploads/2023/11/2023-11-29-12.03.05.jpg?w=1140 1140w” sizes=”(max-width: 860px) 100vw, 860px” data-recalc-dims=”1″/>
Above 20 on the ADX confirms the trend | ETHUSD on TradingView.com
An uptrend or more Whipsaw? How ADX confirms trends
The death cross and golden cross price action on ethereum 1-week chart failed to generate follow-through in either direction. So how can we be sure that this is not another premature crossing?
This is where the average directional index (ADX) comes into play when measuring the validity of moving average crossovers. The ADX aims to measure the strength of the trend, usually on a scale of 0 to 100.
As the 1-week ADX rises from below 20, it confirms growing momentum reducing the odds of further price action. Traders often use these types of ADX readings to confirm gold/death crosses and enter only the highest conviction signals.
The 1W ETHUSD Average Directional Index is not yet above 20, but it is approaching this key level. Furthermore, it gives much more validity to the golden cross.
