A selloff in Ether (ETH) on Nov. 16 has increased the chances of its price falling below $4,000.
ETH plunged 10% to around $4,100 amid an ongoing market correction led by Bitcoin (BTC). In doing so, Ether dropped below its fourth-quarter upward trendline support.
ETH/USD also tested its 50-day exponential moving average (50-day EMA; the velvet wave in the chart above) as its new price floor before bouncing higher. The next support line to keep an eye on if the 50-day EMA is broken is somewhere around $3,700.
More declines ahead?
The given ascending trendline comes as a part of a rising wedge, a technical pattern many analysts treat as a bearish reversal signal. It appears when the price fluctuates inside a range defined by two converging, rising trendlines.
Meanwhile, analysts confirm a wedge breakout when the price breaks below the lower trendline and if accompanied by a rise in trading volumes. They typically eye a run down toward the level at a length equal to the widest distance between the wedge’s trendlines.
As a result, Ether has the potential to drop below $3,000, based on the rising wedge setup. Nonetheless, there is a catch.
Retesting ascending triangle resistance as support
Offsetting the bearish reversal setup brought forth by the rising wedge structure is an ascending triangle, which puts Ether at around $6,500 by the end of 2021.
The bullish setup emerges as the price of ETH retests the triangle’s resistance level as support days after breaking above it. Such a move typically removes weak hands from the market and creates opportunities for traders/investors with a long-term upside outlook based on the asset’s strong underlying fundamentals.
Therefore, Ether’s latest pullback may end up exhausting as ETH price reaches the triangle resistance below $4,000 — also the rising wedge’s lower trendline. Should a rebound follow suit, the price could climb toward $6,500.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk, and you should conduct your own research when making a decision.