ETH Probing Key Downtrend, Breakout To ATHs Soon?

ETH Probing Key Downtrend, Breakout To ATHs Soon?

By FX Empire | FX Empire | 30 Nov 2021


ETH is currently probing a key downtrend, a break above which could see a push back to record highs. ETH FXEmpire

After tumbling to fresh monthly lows at $3917 last Friday in tandem with a broad crypto market sell-off, which took its cue from downside in risk-sensitive assets across financial markets at the time, Ethereum (ETH/USD) has recovered substantial ground.

The cryptocurrency, which is the second-largest in the world by market capitalisation (currently just under $530B) is currently changing hands in the $4400s, up some 12% from Sunday’s lows of just under the $4000 level.

Indeed, support at $4000 held like a rock over the weekend and provided ETH with a solid foundation to push higher late on Sunday and into Monday. The $4000 level has been probed on numerous occasions since the middle of October but has so far held firm.

ETH approaching key downtrend

ETH’s rebound has seen it break above its 21-day moving average and come within a whisker of testing a key downtrend that has been capping the price action since the 10th of November.

That downtrend, which ETH is likely to hit in the $4450-$4500 area, is a significant hurdle for the Ethereum bulls if they want to see prices return to last week’s highs in the $4550s.

Should this downtrend be broken, however, that would likely inject a dose of technical buying impetus into the cryptocurrency that would propel it back to last week’s high and likely above it. Was that to be the case, technicians would be targeting a move back towards the record highs in the $4800 area.

 

 

On the other hand, if the bulls fail in their attempts to force a break above this key downtrend, that could signal another move back down towards the $4000 level. But on its way, ETH may find some support at its 21 and 50DMAs in the $4390 and $4220 areas respectively. The 50DMA in particular has been well respected in the past, so any dip back here may well be seen as a buying opportunity.

 

Descending triangle forming?

Looking at ETH/USD over a slightly longer time frame, however, the pair continues to respect a descending triangle formation that continues to squeeze the price action. The pair is currently in the process of testing the descending trendline that forms the top of this pattern, but if it fails and falls back again, there is a strong risk of a downside break below $4000.

 

 

That is because, typically, descending triangles are indicators of an impending bearish breakout. Was ETH/USD to break below the key $4000 level, that would open the door to push all the way down to the next significant area of resistance around $3670. Below that, there is further support in the $3200 area in the form of a decent balance area during September and the 200DMA.

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