ETH Technical Analysis February 5, 2026: Risk and Stop Loss

ETH is trading at the 2.122$ level with a daily 5.80% drop within a strong downtrend; despite oversold RSI (23), volatility is high and due to BTC correlation, capital protection should be prioritized. Investors should monitor the 2.068$ support breakdown and limit position size to 1-2% risk.

Market Volatility and Risk Environment

ETH market is moving in a high volatility environment as of February 5, 2026. The daily price range was between 2.068$ - 2.267$, showing approximately 9.6% fluctuation; combined with the 5.80% drop in the last 24 hours, it creates a risky environment. Although RSI at 23.12 gives an oversold signal, no quick recovery is expected due to downtrend dominance and Supertrend being bearish. The price not being above EMA20 (2.657$) confirms short-term bearish momentum. Volume is strong at 39 billion$ but selling pressure dominates. Volatility based on ATR (approximately 150-200$ daily) requires wide stop losses; sudden spikes can erode capital. 11 strong levels detected in multiple time frames (MTF): 1 support/2 resistance on 1D, 1S/4R on 3D, 2S/2R distribution on 1W, the abundance of resistances reinforces the downtrend. On the fundamental side, Vitalik Buterin's L2 scalability criticism (February 3) may create additional selling pressure; monitor news flow.

Risk/Reward Ratio Assessment

Potential Reward: Target Levels

In a bullish scenario, breaking 2.295$ (63/100 resistance) and 2.645$ (60/100) levels could bring the 3.000$ target into play; this offers approximately 41% upside potential from the current 2.122$. However, reaching this target within the downtrend requires BTC recovery and volume increase. If calculated from the entry level for risk/reward ratio (e.g., 2.122$), the reward side looks attractive but the probability of realization is low.

Potential Risk: Stop Levels

Although the bearish target is an extreme level like 851$ (score 20), short-term invalidation occurs on the 2.068$ (83/100 support) breakdown; this means about 2.5% loss. If Supertrend resistance is confirmed at 2.645$, the decline may accelerate. Risk/reward ratio should ideally be 1:2+; in the current setup, it's downside weighted (around 1:0.5), so long positions are risky.

Stop Loss Placement Strategies

Stop loss should be placed based on technical structure: Place it 1-2% below the main support 2.068$ (e.g., 2.040$) to provide volatility buffer. Structural approach: Use below daily low (2.068$) or dynamic trailing stop according to EMA20. Despite oversold RSI, wait for trend breakdown; ATR x1.5 (approximately 300$) distance is ideal for early entries. Strategies: (1) Fixed stop: Below support, (2) ATR-based: Volatility-adjusted, (3) Time-based: Adjust according to 1D close. This prevents whipsaws and protects capital. MTF levels (1W supports) as reference for long-term stops; close position on breakdown.

Position Sizing Considerations

Position size should be calculated to risk 1-2% of total capital; for example, in a 100,000$ portfolio, 1% risk=1,000$, if stop distance is 50$, then 20 ETH (1,000$/50$). Optimize with Kelly Criterion or fixed fractional methods: Increase size if risk/reward >1:2. Reduce size when volatility is high (ATR>150$). Diversification: Max 10-20% allocation to ETH. Educational note: Kelly formula (Win%*AvgWin - Loss%*AvgLoss)/AvgLoss provides max growth, but use conservative half. These concepts keep drawdowns at 20%.

Risk Management Outcomes

Key takeaways: Longs are risky due to downtrend and BTC correlation; even shorts have an extreme 851$ target. Measure volatility with ATR, anchor stops to structure. News risk (Vitalik comment) adds uncertainty. Capital protection: Max 2% risk/trade, adhere to 5% daily portfolio limit. For spot, follow ETH Spot, for futures ETH Futures. Disciplined risk management minimizes drawdowns.

Bitcoin Correlation

ETH shows high correlation with BTC (0.9+); BTC down 6.33% at 71.311$ in downtrend, Supertrend bearish. If BTC supports at 70.166$, 67.017$, 58.307$ break, ETH drop below 2.000$ accelerates. If resistances 73.419$, 76.620$ not overcome, altcoin pressure continues. BTC dominance increase crushes ETH; monitor BTC as lead asset, adjust ETH entries accordingly.