Disclaimer: The findings of the following analysis are the sole opinions of the writer and should not be taken as investment advice
Ethereum Classic showed signs of recovery after gradually rising from its 22 June low of $37.5. However, its broadening wedge seemed to be under the threat of a breakdown. With Bitcoin moving below $39,000 at press time, ETC will now require an external catalyst to avoid a sharp sell-off.
At the time of writing, ETC was valued at $47.8, down by 2% over the last 24 hours.
ETC 4-hour chart
Ethereum Classic’s bounceback from its 22 June swing low of $39 and its subsequent movement thereafter led to the emergence of an ascending broadening wedge. Although the pattern generally sees a breakout in the direction of the preceding trend, in this case -bullish – broader market cues took precedence over isolated setups.
This was supported by the fact that ETC registered an impulsive breakdown from the bottom trendline despite rising consistently over the prior sessions. Its next support zone lay between $46.5-$47.8 and failing to hold losses above this zone could result in an even sharper decline.
The Relative Strength Index found support around its equilibrium level, but it had dropped into bearish territory at press time. This was a result of selling pressure creeping into the market.
The Directional Movement Index’s -DI looked to cross above the +DI and a potential trend shift seemed to be on the table too. The MACD made lower highs and projected a bit of a bearish divergence in relation to ETC’s price action.
Although the aforementioned signs are not indicative of a clear bearish result just yet, traders must keep a close eye on certain developments. A close below $46.5-$47.8 can trigger a strong sell-off and drag ETC towards $44 – The starting high of ETC’s broadening wedge.
Traders can short ETC once the breakdown takes place, but must be mindful of a broader market resurgence.