Ethereum [ETH] left its investors quite disgruntled after its inability to break the chains of its daily 20 EMA (red) for two months now. The ripples of the recent Bitcoin rally aided ETH’s falling wedge breakout to test the 23.6% Fibonacci level.
A sustained pullback below the point of control (POC, red) would hamper near-term bullish efforts.
Not losing the POC level could lead ETH into an extended squeeze before a trend-altering move. At press time, the alt was trading at $1,969.3, up by 4.32% in the last 24 hours.
ETH Daily Chart
Trading against the current trend without a substantial increase in buying volumes may not prove to be a profitable decision. Considering the current market dynamics, the rejection at the 23.6% level could lead ETH into an extended stretch near the POC region.
However, a convincing close below the POC would expose the coin to a 5-7% downside. Post this, the buyers would likely provoke a bounce-back from the $1,790-level.
Despite the recent breakout, the Supertrend refrained from changing positions as it had been in the red zone since April 11.
On the flip side, Historically, the coin has displayed an inclination for buying comebacks after the gap between 20 EMA (red) and 50 EMA (cyan) extends beyond 13%. A gradual bounce-back from the POC region would help the alt test the 38.2% level in the days to come.
Rationale
The RSI marked a decent rally over the past four days, but had yet to cross the midline and claim a bullish edge. Similarly, the rise in the CMF slowed to near zero.
Over the last few weeks, the OBV witnessed lower troughs and peaks alongside the price action. Thus, confirming the strength of the current direction.
Finally, all of these indicators have seen a bearish divergence with price over the past week and hinted at a possible near-term setback.
Conclusion
The bulls needed to step in to ramp up the buying volumes at the POC region to prevent a 5-7% downside risk.
A close below $1956 would open a doorway for short-term setbacks. An eventual rally past the 20 EMA should act as an entry trigger for the bulls. In this case, the profit level will be near the $2,180 area.
At last, investors/traders need to watch out for Bitcoin’s movement. Especially since ETH shares an 96% 30-day correlation with the king coin.
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