Ethereum Looks Set For An Imminent Bounce, But This Pattern Suggests More Downside Ahead

Ethereum ETH/USD cracked below an important psychological support zone at $3,000 on Monday before bouncing back up slightly from the level.

The cryptocurrency market has been in a downward slide since Nov. 10 when Ethereum and Bitcoin BTC/USD hit all-time highs of $4,867.81 and $68,789.63, respectively. Fear has entered into not only the crypto sector, but has also negatively affected the general markets, although to a far lesser extent.

The Federal Reserve’s decision in December to double the tapering of bond purchases and talk of hiking interest rates as early as March has spooked investors. As economist and trader Alex Krüger mentioned in a Twitter thread on Sunday, the crypto sector is “at the furthest end of the risk curve.”

Although Ethereum looks as though a bounce may be imminent for the short-term, long-term traders should be aware that the crypto has a lot of work ahead to give bulls any confidence the bottom is in.

See Also: How to Buy Ethereu • Step by Step

The Ethereum Chart: Ethereum has been trading in a solid downtrend since Dec. 23 when the crypto hit a high of $4,157.82, making a consistent series of lower highs and lower lows on the daily chart. On Monday, Ethereum made another lower low at $2,928.69 but bounced up to wick from that level.

The price action shows that if Ethereum closes the 24-hour trading session above $3,000, the crypto would print a hammer candlestick. A hammer candlestick is often found at the bottom of a trend and can indicate higher prices may come on Tuesday. However, even if higher prices come, Ethereum may just print its next lower high before heading lower again.

If the downtrend is to continue, aggressive bullish traders may have already chosen to enter a position in Ethereum, with a plan to sell when the crypto prints its next lower high. More conservative bulls will likely want to wait for Ethereum to make a daily, or at least 4-hour trend change before opening a position.

Ethereum’s relative strength index (RSI) is measuring in at about 29%, which also indicates a bounce is likely. When a stock or crypto’s RSI reaches or drops below the 30% level, it becomes oversold, which can be a buy signal for technical traders.

Ethereum has resistance above at $3,240 and $3,610.91 and support below at $2,890 and $2,609.02.

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Related Link: If You Invested $1,000 In Bitcoin, Dogecoin And Ethereum At The Start Of 2021, Here's How Much You'd Have Today

Photo: Courtesy of Tim Reckmann on Flickr