Ethereum (ETH) Bounces At Yearlong Horizontal Support
While Ethereum (ETH) is trading inside a short-term bullish pattern, the long-term price action and indicator readings are both bearish.
ETH has been falling since reaching an all-time high price of $4,868 on Nov 10. The downward movement was preceded by a very significant bearish divergence (green line) in the weekly RSI.
Another important RSI reading is the fact that the indicator has now moved below 50.
The weekly RSI first moved above 50 in April 2020 (green icon). As a result, the fact that it has now moved below 50 after two years (red icon) could indicate that ETH is in a long-term bearish trend.
Currently, the price is trading just above the $1,920 horizontal support area. Besides being a long-term support area that has been in place since May 2021, this is the 0.618 Fib retracement support level. As a result, a breakdown below it could be a decisive sign that the long-term trend is definitively bearish.
Cryptocurrency trader @postyxbt tweeted a chart of ETH which shows that the price has bounced at the $1,920 horizontal area. He indicates that he would short a re-test of the $2,500 area. A look at lower time frames is required in order to determine if the price will get there.
ETH breaks down
The daily chart shows that the price has broken down from an ascending support line, which had previously been in place since July. A breakdown from such a long-term line usually indicates that a break in structure has occurred.
The daily RSI is also bearish since it is below 50 and is following a descending resistance line. Additionally, there seems to be a strong resistance area at $2,350.
Despite the bearishness from the weekly and daily time frames, the two-hour chart is not as bearish, since it shows that ETH could be trading inside an ascending triangle. This is considered a bullish pattern, meaning that it would lead to breakouts the majority of the time.
Furthermore, the bullish divergence trendline (green line) in the RSI is still intact.
Wave count analysis
The long-term wave count suggests that ETH has completed a five-wave upward movement (black) that began in March 2020. If so, the price has now begun an A-B-C corrective structure, which might or might now have ended.
This possibility does fit with the bearish readings from the weekly RSI.
The short-term count supports the possibility that another drop will transpire, due to the fact that ETH seems to be completing a fourth wave pullback.
The rejection could occur anywhere between $2,150 and $2,300.
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