Ethereum: Could this pattern trigger a new ATH by October-end

Disclaimer: The findings of the following analysis are the sole opinions of the writer and should not be taken as investment advice

There are a lot of reasons to be bullish on Ethereum. Currently trading at a 45% premium when compared to its September lows, the altcoin leader witnessed an organic rally after rebounding from its $2,700-levels. The word ‘organic’ has been used because the rally was not triggered by any hype or a sudden surge in volumes. Instead, by steady buying at key levels post some minor market drawdowns.

With healthy conditions present along the RSI and Squeeze Momentum Indicator, ETH can be expected to face little to no hiccups on its journey to $4,000. From there, a possible inverse head and shoulder breakout could drive ETH to new heights before October comes to a close.

Ethereum Daily Chart

Source: ETH/USD, TradingView

The last five days saw Ethereum embark on a 13% run-up from the 61.8% Fibonacci level. Since the price traded close to its next Fibonacci target, ETH seemed vulnerable to a minor drawdown if investors cash out on the rally. Such a development would then invite new longs to be initiated at near support levels of $3,680 and $3,600.

Once buyers gather momentum for a close above the 78.6% Fibonacci level, an inverse head and shoulders pattern could come to light in case sellers hit back at the $4k-psychological level. This movement would allow ETH to complete forming the right shoulder of its bullish pattern.

The focus should be maintained around the sub $3,600-level during this period. Finally, the breakout from the pattern would see ETH transition to the 100% Fibonacci level. From the same, a new ATH would be achievable. On the other hand, bearish sentiments will start to creep in if ETH weakens below $3,300 at any stage. Expect a retest of September lows in such a scenario.

Reasoning

At the time of writing, the diverging nature of the EMA Ribbons, along with bullish readings on the RSI and Squeeze Momentum Indicator (SMI), backed a favorable outlook.

The RSI had more room for growth before touching overbought levels, while the SMI was in the middle of a rising peak- only its third since late July.

Conclusion 

ETH could complete its right shoulder over the course of next week and eye a breakout by October-end. Healthy conditions on its indicators, coupled with a bullish broader market, certainly made ETH’s long-term narrative look even more favorable.