ETH rejection at $2.7K could mean more trouble

ethereum's recent rejection at the key resistance region of the 100-day MA level suggests a false breakout and possible short-term correction.

However, a break above this threshold could trigger a bullish rise towards $3,000. The price is expected to consolidate, with $2,400 as a critical support level.

Technical analysis

By shayan

The daily chart

ethereum has recently seen a notable surge in demand and bullish momentum, causing the asset to test and slightly break the decisive resistance region formed by the 100-day moving average at $2.7K and the upside-down inverted neckline. and shoulders at 2.6 thousand dollars. Despite this brief breach, eth quickly faced rejection due to the significant supply at this level, causing the price to fall below the 100-day MA.

This false breakout hints at a bullish trap, indicating a potential downward consolidation correction period in the near term. ethereum is trading between the 100-day MA and the $2,500 support region, and a break above this resistance will likely indicate a sustained uptrend.

The 4 hour chart

On the 4-hour chart, ethereum rose towards the critical resistance zone bounded by the 0.5 ($2.6K) and 0.618 ($2.7K) Fibonacci retracement levels, representing a major barrier for buyers. A break above this range could lead to massive short liquidations and a further price rally. However, the recent price action indicates intense selling pressure near this area, resulting in a rejection and interruption of the bullish momentum.

If this selling pressure persists, ethereum will likely enter a medium-term consolidation correction period, targeting the lower boundary of the flag pattern around the $2.4K threshold. Conversely, if buying pressure resurfaces and the price breaks the $2,700 resistance, the next target will likely be the substantial $3,000 resistance, which also coincides with the 200-day moving average.

Chain analysis

By shayan

The estimated leverage ratio is an essential metric for measuring the risk that futures market participants are willing to take on by using leverage. A rising ELR typically indicates an increase in leveraged positions, which can amplify market movements in either direction.

The metric has increased in recent months, coinciding with a general downward trend in prices. This suggests that more traders are opening high-leverage short positions, betting on further price drops for ethereum. The market seems bearish on eth's upcoming prospects, with many expecting further declines.

With leverage at worrying levels, the futures market is now considered overheated. This leaves ethereum vulnerable to a potential short squeeze event.

In such a scenario, if eth rises unexpectedly, traders with short positions could be forced to cover their positions by buying back eth, creating an impulsive price rise. The 100-day moving average of $2,700 is a key resistance level. A break above this level would likely lead to massive short liquidations, which would increase the price of eth.

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