Ethereum: Here’s why ETH’s drop below $1,600 could be crucial for traders





Disclaimer: The conclusions of the following analysis are the sole opinions of the author and should not be taken as investment advice.

Over the past month, Ethereum [ETH] gained a foothold in the apex region of its long-term rising wedge on the daily chart. After a reversal from the upper band of the Bollinger Bands (BB), the alt king dipped below its 20 EMA (red) and 50 EMA (cyan).

The play is now at an important moment. A potential rebound from the $1,603 support could help buyers prevent a continuation of the downtrend. At press time, the alt was trading at $1,639, down 5.16% in the past 24 hours.

ETH Daily Chart

Buying pressure on ETH from its mid-June low has driven it higher above the BB baseline (green). Read also: ETH Wallet Activity and Discussions Hit Monthly Highs: The Merge Effect?. The altcoin has seen a return on investment (ROI) of over 73% since its July 13 low and has broken its vital $1,600-$1,700 range over the past week.

After hovering near the upper BB band for over a month, the recent resurgence in selling has dragged ETH below the short-term EMAs and base line.

If price action remains below the daily 20/50 EMA limits, the bears will look to accelerate their advantage in the days ahead. Thus, a convincing close above the 50 EMA could help ETH retest the $1,730 zone. This trajectory could induce a phase of low volatility near the EMAs.

Any dip below the $1,603 support could be interpreted as a sell sign. In this case, the $1,500 area near the lower BB band could provide short-term rebound opportunities.

Justification

The Relative Strength Index (RSI) fell below the midline to reflect a slight selling advantage. Traders/investors should watch a rally towards the 50 level support to identify prospects for a bearish invalidation. This may interest you: Beginner’s Guide: What is Bitcoin (BTC), and how does it work?. A move close to the midline would only reaffirm the alt’s slow trend.

The Accumulation/Distribution indicator resonated with the recent dip but apparently found a support level. Any recovery from this level would be a sign of a likely accumulation phase that could ease the recent selling pressure.

Given the breakout of the rising wedge approaching the $1,603 support near the lower BB band, the buyers will be scrambling to defend their ground. But ETH needs to find a close above the daily 50 EMA to ignite the chances of a robust rebound. Potential buy/sell targets would remain the same as discussed above.

Finally, investors/traders should monitor the movements of bitcoin. Indeed, ETH shares a 30-day correlation of 88% with the centerpiece.

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Be vigilant and consult your financial adviser before making any investment decision. Mirror-Mag cannot be held responsible in the event of bad investments. Before using any third-party service, you should do your own research.

Thomas E.
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