After a 40 percent rally in the price of ether, traders are gauging the risk of a fakeout.
On July 17, Ethereum’s native token Ether hit a major technical resistance point.
Merge-led Ethereum price breakout
After struggling to break through two strong resistance levels, ETH’s price fell by 1.8% today to $1,328.
Ether rallied by over 40% on July 13 to over 1,300 USD. The jump appeared partly because of euphoria surrounding the upcoming “Merge” scheduled for September.
Meanwhile, a golden candle’s appearance on Ethereum’s 4-hour chart also boosted its upside sentiment among technical analysts.
ETH price risks fakeout
Since July 13, Ether has been rising steadily, breaking through a critical horizontal resistance level that somewhat constitutes an “Ascending Triangle Pattern.”
An ascending triangle is a continuation pattern. It is formed when price action forms an upward sloping line. If the trend continues, the next resistance level will be higher than the previous one. When the trend reverses, the next support level will be lower than the previous one.
Scott Melkers, an independent market analyst at Altana Digital Research, considers ETH’s bullish exit out of its prevailing ascending triangle pattern to signify that it will rally further. He said, “I think we’re going to see a lot of volatility in the next few weeks.”
Ethereum broke out of the descending triangle and is currently testing the resistance line at $1,300. However, its close above the triangle’s upper trendline hasn’t accompanied an increase in trading volume. That suggests a weakening upward momentum, i.e., a fakeout.
ETH’s price risks reversing the triangle’s upper trend line near $1,284. If the bulls fail to defend the $1,284 level, the bears will attempt to break below the triangle’s lower trend line near $1.053. A breakdown of the latter supports a drop to $0.976.
A break below $1,280 would risk re-activates the ascending triangle setup with an upward bias. As a result, Ethereum could crash to $750, according to the rule of technical analysis.
ETH/BTC daily price chart features descending wedge breakout setup.
That means a 45 percent decline from current price levels possible.