The Ethereum (ETH) has been losing ground against the dollar for the past four weeks, but compared to bitcoin it’s holding up quite well
Wave analysis and indicator readings on the daily chart suggest that ETH will continue to outperform BTC, reaching its highest levels since 2018.
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Ethereum fails to consolidate gains
As the results of technical analysis on the weekly chart show, the picture for ETH/BTC looks uneven.
Since May 2021, the price has moved in a range of ₿0.055 to ₿0.078, which is a neutral signal.
It is possible that the price is stuck inside a descending parallel channel. However, the support line for this pattern has passed too few strength tests.
If the pattern does confirm, then the consolidation of the price in its upper part, would be a bullish sign.
Unlike the support line, the midline of the channel has been tested many times already (green icons).
In contrast to the support line, the midline of the channel has been tested many times already (green icons).
In the meantime, the Relative Strength Index (RSI) on the weekly chart gives mixed signals.
It is a momentum indicator which indicates overbought/oversold and bullish/bearish market sentiment, depending on whether it is above or below the 50 mark.
In this case, the RSI is rising, but it is still below 50. This does not shed any light on the further direction of the trend.
ETH reached the bottom
In the meantime, the wave analysis of the daily chart shows a bullish picture.
First of all, it indicates that the bottom has already been reached.. The price formed a corrective A-B-C structure (white) in which wave B took the form of a triangle.
The fact that the correction ended right around the 0.618 Fibonacci retracement support confirms this hypothesis.
The Fibonacci levels are traditionally thought to be the most likely placeholders for price stalling and reversal after a major advance in any one direction.
As expected, at these levels, the market can win back some of the distance traveled and only then resume the movement in the original direction.
In addition, they can determine the limits of a price move.
It is the Fibo of 0.618 which often serves as the bottom if the decline in price was only a correction.
Second, the daily RSI is showing bullish divergence signals. We can talk about bullish divergence when a decline in price is not accompanied by a decline in momentum.
This often results in a bullish reversal of the trend. Moreover, the indicator is now above 50, which is another sign of a bullish trend.
Despite this bullish outlook for ETH, a drop below the C wave low of ₿0.062 would mean that the trend is still bearish.
In that case, the most likely scenario would be a decline towards the support area of ₿0.058.