Disclaimer: The results of the following analysis are the sole opinions of the writer and should not be considered investment advice.
During the last month, Ethereum [ETH] grew to set foot in the apex region of its long-term rising wedge on the daily chart. After reversing from the upper band of the Bollinger Bands (BB), the alt king dipped below its 20 EMA (red) and 50 EMA (cyan).
The currency was now at an important moment. A possible bounce off the support at $1,603 could help buyers prevent a continued downtrend. At press time, the alt was trading at $1,639, down 5.16% in the last 24 hours.
ETH daily chart
Buying pressure from ETH’s mid-June lows fueled a surge above BB’s (green) baseline. The altcoin saw a return on investment (ROI) of over 73% since its July 13 low and broke out of its vital $1,600-$1,700 range over the past week.
After hovering near the upper band of the BB for more than a month, the recent resurgence of selling took ETH below both the short-term EMAs and the baseline.
If the price action remains below the limits of the 20/50 daily EMA, the bears will look to accelerate their advantage in the coming days. Therefore, a convincing close above the 50 EMA could help ETH retest the $1,730 zone. This trajectory could induce a phase of low volatility near the EMAs.
Any drop below the $1,603 support could be interpreted as a sell signal. In which case, the $1,500 zone near the lower BB band could provide short-term recovery opportunities.
The Relative Strength Index (RSI) dipped below the midline to reflect a slight selling edge. Traders/investors should watch for a rally towards the 50 support level to identify the prospects for a bearish invalidation. A move near the midline would only reaffirm the alt’s slow trends.
The Accumulation/Distribution indicator resonated with the recent drop but apparently found a support level. Any recovery from this level would suggest a likely accumulation phase that could relieve recent selling pressure.
Given the breakout of the rising wedge approaching the $1,603 support near the lower BB band, the buyers would be scrambling to defend their grounds. But ETH needs to find a close above the 50 daily EMA to ignite chances for a solid bounce. Potential buy/sell targets would remain the same as discussed above.
Finally, investors/traders should keep an eye on the movement of Bitcoin. This is because ETH shares an 88% 30-day correlation with the king coin.