Since breaking out through the $2,500 level, cryptocurrency Ethereum (CRYPTO:ETH) has made an epic move higher. It has gained about 40% in just two weeks.
But there’s a good chance there is a pause to the rally and a period of consolidation or sideways trading. It has become very overbought.
ENTER TO WIN $500 IN STOCK OR CRYPTO
Enter your email and you'll also get Benzinga's ultimate morning update AND a free $30 gift card and more!
This refers to its momentum. When securities reach extreme levels above what would be their typical trading ranges, they're considered to be overbought. There is a good chance they revert back to the average.
The bottom part of the following chart is a momentum measurement indicator. As you can see, the last time ETH was as overbought as it is now was in January. A one-month period of sideways trading of consolidation followed.
Of course, there’s no guarantee this happens again, but the overbought conditions could put a temporary halt on the rally.