Ethereum Evening Star May Signal the End of the Bull Run
Ethereum has recently been losing its strength against Bitcoin and other top cryptocurrencies. Despite showing some promise, the upside gains have almost vanished. This price action has created a potential bearish reversal signal through a Japanese candlestick pattern. The question now is whether ETHUSD will continue its downward trajectory or bounce back into an uptrend. The technical signals will provide some insights.
Bitcoin and Ethereum, the two leading cryptocurrencies by market capitalization, have been moving in different directions in terms of price action. While Ethereum reached its bottom in early 2022, Bitcoin hit its bottom in November of the same year. However, in 2023, Bitcoin outperformed Ethereum significantly.
Recent developments, such as the cooling down of spot BTC ETF news and the emergence of ETH ETF rumors, have caused a correction of over 20% in both Bitcoin and Ether. Within this correction, Ethereum’s price action has formed what appears to be an evening star candlestick pattern.
In Japanese candlestick analysis, an evening star pattern indicates a potential bearish reversal, which can lead to a reversal from a bull to a bear market.
To confirm the evening star pattern, certain criteria need to be met. It consists of three candles: a tall white candle, a doji, and a large black candle that engulfs at least 50% of the first white candle. The more of the white candle that is engulfed, the stronger the evening star signal becomes.
The pattern reveals the underlying sentiment in the market. The large white candle represents bullish enthusiasm and strength, but it faces resistance and confusion. Eventually, selling pressure kicks in as bears regain control and exhibit unexpected strength against bulls.
It is essential to consider the context of the Japanese candlestick pattern. If the reversal signal occurs at the peak of a rally and is accompanied by bearish technical indicators, it gains more significance. A similar signal appeared at the height of the 2021 bull market, preceding an 82% drawdown.
Confirmation of the candlestick pattern requires a weekly close, followed by a push from bears to new lows in 2024. However, if bulls can reverse the situation and reclaim more than 50% of the candle, the evening star signal could be invalidated.
It is important to note that this analysis is for educational purposes only and should not be considered as investment advice. Investors are urged to conduct their own research and assess the risks before making any investment decisions.