Ethereum Forms Hammer at Resistance
Ethereum initially dipped on Monday to drop below the $3500 level, but then turned around to show signs of life as we ended up with a hammer candlestick. That being said, if we can break above the highs of the weekend, then it is likely that we could go looking towards the $4000 level. We had been rallying quite significantly until the last couple of days, so I think at this point we are more than likely just running out of momentum.
When you get a parabolic move like we had previously gotten into, there are a couple of ways that the market can continue to go higher. The first one is a simple pullback that offers support and a little bit of a “value” in the market, but the alternate scenario is to simply go sideways. If the market goes sideways after a move to the upside, most of the time you will see a bit of a continuation as the market has been digesting the massive amount of momentum that had recently occurred. I think that is what is going on with Ethereum at the moment, because the Bitcoin market looks so strong. Remember, Bitcoin will drag other crypto right along with it most of the time.
That being said, if we break down below the bottom of the candlestick for the trading session on Monday, then it opens up a move down to the 50-day EMA potentially, which would be something that is very common and attract a lot of attention. After all, the 50-day EMA is quite often used to determine an immediate trend, which is most certainly to the upside as I look at the chart. Breaking above the highs of the last couple of days and reaching towards the $4000 level is what I anticipate seeing, and then potentially a move above there. Having said that, if we do break down below the bottom, then I think it is only a matter of time before we would see value hunters, especially if we were to somehow reach all the way down to the $3000 level, which is a large, round, psychologically significant figure and an area where we have seen a lot of order flow as of late. With this being the case, I think that is your “floor the market.”