A selloff in Ether (ETH) on Nov. 16 has increased the chances of ETH’s price falling below $4,000.
ETH plunged 10% to around $4,100 on Tuesday, amid an ongoing market correction led by Bitcoin (BTC). In doing so, Ether dropped below its fourth-quarter upward trendline support.
ETH/USD also tested its 50-day exponential moving average (50-day EMA; the velvet wave in the chart above) as its new price floor before bouncing higher. The next support line to keep an eye on if the 50-day EMA is broken is somewhere around $3,700.
The given Ascending Trendline comes as a part of a Rising Wedge, a technical pattern many analysts treat as a bearish reversal signal. It appears when the price fluctuates inside a range defined by two converging, rising trendlines.
Meanwhile, analysts confirm a Wedge breakout when the price breaks below the lower trendline and if accompanied by a rise in trading volumes. They typically eye a run-down towards the level at length equal to the widest distance between the Wedge’s trendlines.
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As a result, Ether has the potential to drop below $3,000 based on the Rising Wedge setup. Nonetheless, there is a catch.
Offsetting the bearish reversal setup brought forth by the Rising Wedge structure is Ascending Triangle, which puts Ether at around $6,500 by the end of 2021
The bullish setup emerges as the ETH price retests the Triangle’s resistance level as support days after breaking above it. Such a move typically removes weak hands from the market and creates opportunities for traders/investors with a long-term upside outlook based on the asset’s strong underlying fundamentals.
Therefore, Ether’s latest pullback may end up exhausting as the ETH price reached the Triangle resistance below $4,000 — also the Rising Wedge’s lower trendline. Should a rebound follow suit, the price could climb toward $6,500.