Ethereum faces another bull trap as massive breakdown looms
March 4th, 2021
Ethereum has not risen above $1,700 since the drop from all-time highs above $2,000. On the downside, the pioneer altcoin has tested support at $1,300. Recovery has taken place from the beginning of the week amid the increase in bull traps’ frequency.
On Wednesday, Ether spiked above $1,600, somehow convincing investors that it was ready for a breakout to $2,000. However, the smart contract token stalled at around $1,650, bowing to the formation of a double-top pattern. A correction is underway at writing, which could bring to an end the V-shaped recovery on the 4-hour chart.
A double-top pattern is bearish and develops when the price of asset tests but fails to break above a previous hurdle with a trough in between. Usually, the area is known to contain substantial selling pressure. If the price slices through, the bearish narrative are ignored but failing to break through this zone suggests that Ethereum is likely to drop significantly.
At the time of writing, Ether is dancing at $1,560 after losing support at $1,600. The 200 Simple Moving Average (SMA) appears to have contributed to the selling pressure above $1,600. Glancing lower, Ethereum is looking forward to securing support at $1,520, as highlighted by the 50 SMA. If the bearish leg stretches past this zone, Ether will continue to the next support target at $1,440.
ETH/USD 4-hour chart
On the upside, the Moving Average Convergence Divergence (MACD) shows that buyers are relatively in control. The indicator is holding above the midline, hence the bullish signal. Support above the 50 SMA will also avert the potential losses to $1,440 and $1,300, respectively.