Ethereum (ETH) looks headed for a clear breakout in the short-term. That’s because it is trading in an increasingly tight range. In technical analysis, this usually indicates a possible breakout after an accumulation phase. An upside break usually indicates that the range was a bullish accumulation, and vice versa. In the case of Ethereum, who has been accumulating in the last 4 days, is it bulls or bears, and in which direction will it break out?
To try and determine the direction in which Ethereum will breakout, one needs to check out the direction it has been moving relative to a major support or resistance level. From the day charts, it is clear that Ethereum has been in a tight range, below the 21-day moving average. This is an indicator that the bulls in the market are not strong enough to drive up the price of Ethereum at the moment. As such, this is most likely a bearish consolidation. Therefore, it is logical and prudent to expect an Ethereum downside break.
The 12 hour chart, which is essentially the intra-day chart paints a similar picture for Ethereum (ETH). That’s because on this chart, we see Ethereum (ETH) trading in a tight range between the 55 and the 21 day moving averages. While this consolidation is upwards, it looks weak, with very little upside gains. This is an indicator that there is very little buying volumes in Ethereum (ETH) at the moment.
The possibility of an Ethereum bearish breakout can also be confirmed with a look at the chart of Bitcoin (BTC). That’s because bitcoin is the dominant cryptocurrency, and the rest of the market tends to trade along with it. Looking at bitcoin’s price activity in the last 12 hours, it seems to have lost momentum at around $6538 along the 55-day moving average. This could mean that bitcoin buying volumes have declined, and a slight increase in sellers in the market might push the price lower. If bitcoin breaks downwards, it could trigger a similar move in Ethereum (ETH) and the rest of the market as well.
So what’s the likely target for this crypto in case of a bearish breakout? From the 12-hour charts, Ethereum (ETH) could drop to $407, which is a major support level. This price level also looks like a valid support level in the day charts, an indicator that it is a solid short-term support.
However, a bearish break in the short-term has no bearing on the long-term growth of Ethereum. From a more long-term perspective, Ethereum (ETH) is at the early bulls phase, having closed higher for two consecutive weeks. Bitcoin too seems to have bounced off long-term support at $5700, and looks set to head higher, with the next target being $7500. As bitcoin (BTC) rises, it will push Ethereum (ETH) with it. Longer term, Ethereum could still hit $1000 a coin. It has the fundamentals to achieve this, especially if it gets it right on scalability.