This could limit further upside for Ethereum
Ethereum has been in the front and center of a wider broader market recovery due to a number of reasons. Bullish sentiment continued to be high due to the anticipated launch of EIP 1559, its upcoming 2.0 upgrade, and the fact that for the first time in history, ETH’s address activity surpassed BTC’s address activity. At the time of writing, the world’s largest altcoin traded at $2,332, up by 6% over the last 24 hours.
Ethereum 4-hour chart
ETH toppled its 50% Fibonacci extension level ($2,292) post a bull fall breakout. Prices were now above their 4-hour 200-SMA (green) for the first time since the 19 May crypto sell-off. The next target for the bulls lay at the 61.8% Fibonacci extension ($2,432) – a region that was largely in focus during several retracement stages ranging form late-May to mid-June.
The area also clashed with the daily 50-SMA (not shown) and was an important region to reclaim for a faster recovery. The 78.6% and 1% extension levels lay at $2,631 and $2,885, respectively, but these price points would be more of a mid-long term target.
The Aroon up was closer to 100% and suggested that ETH was forming newer highs in a trending market. Directional Movement Index’s +DI and -DI lines also diverged at press time as a bullish trend was intact. However, moving forward, traders ought keep an eye on the Relative Strength Index.
While the index did trade in bullish territory, a move into overbought zone would warrant a reversal. This could be triggered once ETH approaches its 61.8% Fibonacci extension and a minor correction could see prices drop back towards the 50% extension level and trade close to $2,200 before the next upcycle. If the next wave of selling pressure is strong, ETH bulls must be wary of a drop below the $2,000 mark and 50-SMA as this could lead to a breakdown from an up-channel.
ETH’s indicators heightened chances of an extended rally over the coming sessions- one that could push prices towards the 61.8% Fibonacci extension before a correction hits the market. Traders could play it safe and wait for such a reversal before entering into any long positions.