Ethereum Holds on Stable Support While Sell Signals Pop Up
Ethereum seems bound for a correction after gaining nearly 1,560 points in market value.Â
Key Takeaways
- Ethereum sits on top of stable support following an 87% rally.
- However, a particular technical indicator recently presented a sell signal.
- A spike in downward pressure could see ETH drop toward $2,500.
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Ethereum has been on a roll lately after undergoing one of the most anticipated hard forks. Although the crowd sentiment remains bullish, multiple indicators suggest that a pullback is underway.
Ethereum Shows Red Flags
The second-largest cryptocurrency by market cap has enjoyed a significant run-up over the past month, gaining nearly 1,560 points in market value. Ethereum went from trading at a low of $1,785 on Jul. 21 to hit a high of $3,340.
Now, some indicators are suggesting that such an impressive rally is approaching exhaustion.
Behavior analytics platform Santiment pointed out that while prices were going up, volume was declining. This divergence is “generally not a good sign” and tends to lead to a correction.
The Tom DeMark (TD) Sequential indicator adds credence to the pessimistic outlook. It recently presented a sell signal in the form of a green nine candlestick on ETH’s 3-day chart. The bearish formation forecasts a one to four 3-day candlesticks correction.
If the selling pressure is strong enough, Ether might start a new downward countdown.
Sitting on Significant Support
IntoTheBlock’s In/Out of the Money Around Price (IOMAP) model reveals that Ethereum sits on top of stable support. More than 300,000 addresses had previously purchased 7.44 million ETH between $3,010 and $3,100.
This crucial interest area could absorb any downward pressure. Still, a breach of the $3,000 demand barrier might encourage investors to quickly sell to avoid seeing their investments go “Out of the Money.”
Under such unique circumstances, Ethereum may take a nosedive towards the next significant support level at around $2,500.
The IOMAP cohorts also show no major supply walls ahead of Ethereum. Based on this on-chain metric, the only one important resistance level sits at $3,200, where roughly 615,000 addresses hold 2.46 million ETH.
If the underlying support level can hold against any increase in downward pressure, the bearish signals could be invalidated, leading to a resumption of the uptrend toward $4,000.
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