Disclaimer: The findings of the following analysis are the sole opinions of the writer and should not be considered investment advice
The month of July started on a positive note for Ethereum as its price managed to climb towards $2,400 on the back of a steady uptrend. However, the narrative later flipped for the world’s largest altcoin as its price was entangled within the confines of a down-channel over the past couple of weeks.
Its rising correlation volatility spread with Bitcoin was also a double-edged sword as it meant that percentage losses would be greater than those of the king coin in case the broader market takes a bearish turn. At the time of writing, Ethereum was valued at $1,879, down by 1.5% over the last 24 hours.
Ethereum 4-hour chart
ETH’s down-channel emerged once buyers were unable to sustain their rise above the $2,400-mark and their 200-SMA (green). The past 10 days saw a gradual decline in value as the market’s bulls ceded the $2,100, $2,000 and $1,900 levels. The next line of defense lay at its 19 May swing low of $1,850 – A region that also clashed with the half-line of ETH’s pattern.
Hence, an argument can be made that a close below this critical zone would validate a breakdown and drag the price towards the next support level of $1,730 – An outcome that would mean losses of another 7.5%. Conversely, a bullish outcome would depend on a hike above the 20-SMA (red)
The Directional Movement Index’s -DI maintained itself above the +DI as a bearish trend was yet to be overturned. However, an ADX reading of 22 meant that the market was less directional, a finding that mitigated the chances of a sharp decline. The Relative Strength Index remained in bearish territory as downwards pressure was yet to be relieved.
Finally, some optimism was provided by the On Balance Volume’s uptrend which pointed to a bullish divergence and a hike in buying pressure.
Chances of another ETH decline were slim and the price might trade above $1,850-mark considering the reemergence of some buying pressure. However, many uncertainties are still present in the market and a breakdown cannot be overlooked. Such an outcome might push the alt’s price to $1,730 before a bullish response.