Ethereum Classic was primed for further downside after breaking south from a parallel channel. A close below the daily 20-SMA (red) could extend another 15% sell-off if no pushback is offered at $48.2. The outlook was backed by a weak reading on the RSI and a bearish DMI which showed no signs of reversing trajectory.
ETC 4-hour Chart
Source: ETC/USD, TradingView
ETC witnessed a breakdown from its parallel channel once bears punctured below the confluence of the 4-hour 200-SMA (green) and lower trendline of the pattern.
A throwback amidst weak volumes presented more entry points for participants willing to short ETC’s breakdown. To trigger another 7% decline, bears needed to target a close below ETC’s defenses at $51.4 along with the daily 20-SMA (not shown).
Buyers could punch back at 7 September’s swing low of $48.2 and lay the foundations for a bullish reversal. However, ETC would be exposed to another 8% drawdown if sellers slice below $48.2.
Reasoning
Now ETC’s 4-hour RSI traded within a bearish descending triangle and projected more weakening in the coming days. This was not ideal for those hoping for a false breakout and return to the ascending channel.
Moreover, the Directional Movement Index’s bearish position was expected to strengthen based on an ADX reading of 33. On the other hand, the MACD did provide some respite after inching towards a bullish crossover.
However, the index would need to climb convincingly above its mid-line to flush out skepticism in the market.
Conclusion
An immediate 7% drawdown was likely once bears trip over the daily 20-SMA (not shown). Buyers would need to mount a comeback at the $48.2-support level, in order to prevent ETC from bleeding further on the chart.
Although two ideal entry levels were foregone, traders can take up short positions once ETC closes below $51.4 and exit their trades around the $48-mark.
