Ethereum formed a “golden cross” pattern on a weekly basis, marking the second such signal this year. If history repeats itself, the long-term impact could be very positive, but there are reasons to temper expectations.
A weekly golden cross has formed | ETHUSD on TradingView.com
Possible targets for Ethereum Golden Cross and new ATH
There is 1W ETHUSD Formed the Golden Cross A golden cross is a buy signal in a moving average based trading system. This suggests that the trend is moving in an upward direction and this is noteworthy as trends tend to persist.
A golden signal occurs when the short-term moving average (50-week MA) crosses below the long-term moving average (200-week MA). A dead cross is formed when the opposite situation occurs.
The golden cross, last seen for Ethereum in December 2020, followed a massive 600% rally over the next year to the asset’s all-time high near $4,900. This time, a repeat move of similar magnitude would push Ethereum above $12,000. This is more than six times the current price of about $2,000.
However, it is important to note that not all golden crosses lead to the expected uptrend. In 2023 alone, 1W ETHUSD has experienced two death crosses and a golden cross, which shows how moving average-based systems do not follow established trends and are prone to whipsaws.
Above 20 on the ADX confirms the trend | ETHUSD on TradingView.com
Uptrend or more Whipsaw? How ADX identifies trends
Whipsawing death cross and golden cross price action on the Ethereum 1-week chart failed to generate follow-up in either direction. So how can we be sure this isn’t yet another premature crossover?
This is where the Average Directional Index (ADX) comes into play when measuring the effectiveness of moving average crossovers. ADX aims to measure trend strength, typically on a scale of 0 to 100.
The one-week ADX rising from below 20 confirms growing momentum which reduces the likelihood of further price movement. Traders often use these ADX readings to check for gold/death crosses and only enter the signals they are most confident in.
The 1W ETHUSD Average Directional Index is not yet above 20, but is approaching this key level. Above that, much more validity is given to the Golden Cross.