Ethereum’s native token Ether, (ETH), looks set to increase its saleoff this week, as it struggles near the $4,000.
The ETH price fell by more than 5.50% on December 6 to an intraday lowest of $3,913. It did so by falling through upwardly sloping support, which constituted an Ascending channel that, more or less, appears to be a Bear Flag, a bearish continuation setup.
Daily price chart for ETH/USD featuring Bear Flag setup Source: TradingView
Bear Flags are usually identified by conservative traders when an instrument consolidates within a parallel channel following a significant price drop (called Flagpole). They expect the price to fall below the Flag’s lower trendline. When it does, traders determine their profit target by measuring Flagpole’s height then subtracting it from breakout level.
The Bull Flag strategy can be applied to Ether’s price trends and one can expect the cryptocurrency drop to $3,200 over the coming sessions. The level is also close to the 0.5 Fib line ($3,264), of the Fibonacci Retracement graph, which was drawn from the $720 swing low to the $4.808-swing peak.
Additional confirmation is required
The Bear Flag setup suggests more pain ahead for Ether, but some analysts believe that the Ethereum token still has room to run to its upside.
PostyXBT, an independent analyst in the market, asked his large Twitter following to pay attention to Ether’s deep price wick starting Saturday. This underlined how Ether’s sudden crash from nearly $4,240 to as low at $3,575 (data sourced from Coinbase). Traders responded with aggressive buying.
The pseudonymous analyst stated that ETH’s weekly close of $4k indicates that it is one the most attractive coins. He also noted that few people hold the structure “despite its wick.”
Chart of weekly perpetual futures contracts in ETH/USD. Source: TradingView
Another popular analyst Crypto FOMO also mentioned Saturday’s rebound as an argument to remain bullish on Ether. The analyst published Monday’s analysis, stating that bulls might push Ether to $10,000 if it can maintain its growing channel support (the Bear Flag) in a Monday analysis.
“That’s also because Ethereum is crashing much less than other cryptos which is very bullish,” the channel stated while highlighting Ether’s growing strength against Bitcoin (BTC).
The top ten cryptocurrencies have performed well against USD and BTC over the past 30 days. Source: Messari
Ether appears to be eyeing $6,500 on its weekly chart after it broke out of the Ascending Triangle.
After having been in the Triangle range for a little more than four months, the ETH price moved out of the Triangle range in week ending Oct. 25, after consolidating within it for a little less than four months. However, traders returned to the Triangle range to test the upper trendline for support as is typical in bullish continuation setups.
Weekly price chart for ETH/USD featuring Ascending Triangle setup. Source: TradingView
The Triangle’s upper trendline is the limit of the price’s ability to continue its upwards rally as long as it remains above the price. This chart shows that the structure’s maximum height is also a consideration.
A decisive break below Triangle’s lower trendline could lead to the invalidation of the bullish setup.
James Wo, the CEO/Founder of DFG Group, a Singapore-based venture capital company, blamed Ether for its consistent positive correlation with Bitcoin. He also noted that a spot market saleoff in the BTC markets, led by ongoing Omicron FUD has seen exchanges liquidate $2B worth of traders’ margined position, which in turn hurt ETH.
Related: BTC sentiment “comparable to funeral” — 5 things you should be watching in Bitcoin this week
The analyst also predicted a price rebound for ETH based upon its adoption in the emerging non-fungible token (NFT), Decentralized Finance (DeFi) and metaverse spaces.
Based on total volume locked, the top five DeFi chains. Source: Defi Llama
Wo stated that “the levels of open interest seen up to the correction for BTC and ETH were an indicator that a bearish scenario is highly probable.”
“We believe the fundamentals remain strong, and long-term values are still very low, based on technological advances and contributions that we are seeing from this industry.”
At the time this article was written, ETH/USD was trading around $4,050.
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