round gold colored ethereum coin

The dive last week below $1,000 for Ethereum (ETH) was a significant one, breaking down a multi-year support level. It coincided with the move below $20k for Bitcoin, amidst a skittish market. It’s managed to take back the four figure handle, and is at $1,100 as we write. So putting on our Tech goggles, where could we head next?

The big picture – head and shoulders

Let’s start by considering ETH on the weekly chart. It can be noted that a head and shoulders formation is occurring. This is a bearish sign, as it’s unclear whether the move has finished at current levels or could extend lower to mirror the left hand side of the first shoulder.

However, it does show us other things that are more positive. The bulk of the sell-off appears to have happened, with a period of consolidation likely ahead. It doesn’t appear that a strong rally will be due in coming weeks, but eventually we will see the formation of a new technical picture as the head and shoulders is coming to an end.

A bullish breakout after a period of consolidation around $1,000 could be seen.

Source: IG

Daily candles more supportive of short-term rebound

When we go to the daily picture, it’s more constructive for ETH. The trend channel shown below does indicate that a move higher in coming days could be seen. Indeed, it has room to run up to above $2,500 before the resistance of the downward trend top would come into play.

There could also be the case of a range bound consolidation in the $1000-$2,000 area for coming days, which ties in with the broader thought of the finishing of the head and shoulders move.

Our view would change if we saw the bottom of the trend broken. With the passage of time, the lower bound becomes closer to $700. A break of this would indicate that the broader sell-off hasn’t finished yet.

Source: IG

Overall, we think that ETH will consolidate in coming days and weeks around the current level, finishing the right shoulder formation. From there, the technical picture resets, offering a potentially supportive next phase for the crypto space.

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