Despite the bearish sentiment prevailing in the futures market and among traders, ethereum‘s recent price action provides a ray of hope as it hints at the possibility of a short-term reversal to reclaim the 200-day moving average.
Technical analysis
By shayan
The daily chart
ethereum price has been in a prolonged downtrend after failing to break above the $2.1k mark. Sellers managed to push the price below the 100- and 200-day moving averages, around $1,800, resulting in a multi-month low of $1,531.
However, ethereum price found critical support between the 50% and 61.8% Fibonacci retracement levels, with values of $1,646 and $1,529, respectively.
Despite the bearish market sentiment, the cryptocurrency has shown bullish signs, notably a clear bullish divergence between the price and the RSI indicator. This suggests a possible change in the market trend. If the price can reclaim its previous significant high, traders can expect a period of steady price appreciation, with the goal of reclaiming the 200-day moving average.
The 4 hour chart
We can observe a consistent bearish trend when we focus on the 4-hour time frame. The price has been steadily breaking below its previous lows and forming an extended falling wedge pattern (marked by white trend lines).
However, after a sharp and impulsive decline, the price has now reached the critical $1,500 support region, which coincides with the lower boundary of the wedge. In this region, we can see the formation of another short-term bullish falling wedge pattern characterized by red trend lines.
Furthermore, a bullish divergence has emerged between the price and the RSI indicator on the ethereum 4-hour chart. This further suggests the possibility of a rally in this price region.
If the buying pressure intensifies and leads to a break above the upper threshold of the short-term wedge, market participants could anticipate a rise towards the $1,700 resistance level. This resistance level also aligns with the upper trend line of the long-term falling wedge pattern. Therefore, it is crucial to closely monitor the price action around these critical levels as they are likely to determine ethereum‘s medium-term trajectory.
By shayan
While ethereum has shown bearish price action in recent weeks, it is essential to examine the futures market to gain insight into how futures traders anticipate near-term price performance.
The chart illustrates ethereum‘s funding rates metric, which represents the periodic payments made to traders, whether long-term or short-term, based on the difference between perpetual contract markets and spot prices. Funding rates reflect trader sentiment in the perpetual futures market, with negative readings indicating prevailing bearish sentiment.
As ethereum price entered a consolidation phase after a period of sharp declines, funding rates also turned negative. This indicates that futures traders have adopted a bearish outlook on eth, raising the possibility of a further price drop. However, it is worth noting that continued negative funding rates can trigger a cascade of short liquidations, which in turn could cause a sudden price rally.
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Cryptocurrency charts by TradingView.
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