The Ethereum (ETH) price rebounded from a long-term resistance area and then made a bearish break of a short-term pattern.
This could condition further declines in Ethereum, which could be either the final phase of a correction or the beginning of a new long-term downtrend.
Ethereum: sellers defend resistance
ETH is a native Ethereum blockchain token co-founded by crypto industry heavyweight Vitalik Buterin.
In the fall of 2022, the entire project migrated from the energy-consuming consensus mechanism Proof-of-Work (PoW) to the algorithm Proof-of-Stake (PoS), which was a significant milestone in Ethereum history.
In April 2023, the network successfully updated Shapella. The upgrade implemented EIP 4895, which allowed for the withdrawal of ETHs placed on Stacking ETHs from the Beacon Chain.
In the meantime, the long-term outlook for ETH looks bearish due to the price dynamics over the past month.
ETH renewed its high of the year in April at $2151. This led to a breakthrough of the resistance area of $1950. However, the next week the price fell sharply and returned below that level.
This indicates that the bullish breakout was false and that Ethereum’s rise above this level was simply a price deviation (red circle).
Such deviations are considered a bearish signal and indicate that the buyers lacked the strength to consolidate the breakout and ceded power to the sellers.
In the next two weeks, ETH formed long upper wicks (red icons), which is also a sign of bearish pressure.
However, there are positive signals. Thus, the weekly Relative Strength Index (RSI) remains bullish as it stays above the 50 mark and rises.
It is a momentum indicator, indicating overbought/oversold and bullish/bearish market sentiment, depending on whether it is above or below the 50 mark.
That said, Ethereum sank below the $1900 horizontal area (red icon). This gives us grounds to consider the previous bullish breakout as a deviation (red circle) and expect the price to decline.
The nearest support is at $1670 and the nearest resistance is marked at $2530.
Will ETH continue its decline
The shorter 6-hour timeframe also supports the possibility of further drawdown. There are two factors in favor of this.
First, the price made a bearish breakout from the rising parallel channel. Such channels are considered bearish patterns and most often end in a bearish breakout.
In addition, wave analysis suggests that price may be in a corrective A-B-C structure (white). If this is true, then the market has already completed wave B and is now in wave C.
This was confirmed by a bearish breakout from the short-term channel.
The support around $1660 is converging as the A:C wave ratio as 1:1 (white) and the Fibo level of 0.618 retracement of the entire previous bullish move (black).
If ETH breaks above the support line of the previous channel, however, that would cancel the bearish outlook on Ethereum and signal a potential upside.
In this case, the price can move towards the long-term resistance at $1950.
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