Ethereum: Reasons why ETH’s drop below $1,600 could be crucial for traders
Disclaimer: The results of the following analysis are the sole opinion of the writer and should not be considered investment advice.
Over the past month, Ethereum [ETH] it has grown to set foot in the apex region of its long-term ascending wedge on the daily chart. After the reversal from the upper Bollinger Bands (BB), the re alt fell below its 20 EMA (red) and 50 EMA (cyan).
The coin was now in an important moment. A potential rebound from the $ 1.603 support could help buyers prevent a continued bearish trend. At press time, the alt was trading at $ 1,639, down 5.16% in the past 24 hours.
ETH daily chart
Buying pressure from ETH’s mid-June lows has pushed a rally above BB’s (green) baseline. The altcoin has posted a return on investment (ROI) of more than 73% since its low on July 13 and has broken its vital range of $ 1,600- $ 1,700 in the past week.
After hovering near the upper band of the BB for over a month, the recent rally in selling has brought ETH below the short-term EMAs and baseline.
Should price action remain below the daily 20/50 EMA limits, the bears would seek to accelerate their lead in the coming days. So a convincing close above the 50 EMA could help ETH test the $ 1,730 zone again. This trajectory could induce a phase of low volatility near the EMAs.
Any drop below the $ 1,603 support could be interpreted as a sell sign. If so, the $ 1,500 zone near the BB lower band could provide short-term bounce opportunities.
The Relative Strength Index (RSI) fell below the midline to reflect a slight selling advantage. Traders / investors should look for a recovery towards the 50-level support to identify prospects for a bearish invalidation. A move close to the midline would only reaffirm slow halt trends.
The Accumulation / Distribution indicator has resonated with the recent decline, but has apparently found a level of support. Any recovery from this level would indicate a probable accumulation phase which could ease the recent selling pressure.
Given the breakout of the rising wedge approaching the $ 1,603 support near the BB lower range, buyers would strive to defend their ground. But ETH must find a close above the daily 50 EMA to ignite the chances of a strong rebound. The potential buy / sell targets would remain the same as above.
Finally, investors / traders need to watch out for Bitcoin movements. This is because ETH shares an 88% 30-day correlation with the king’s coin.