Ethereum (ETH) Technical Analysis: Descending Triangle Forming Despite Golden Crossover
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Ethereum has failed to hold its head above $240 while the global crypto market capital experiences a steep $14 Billion correction today.
At the time of writing, the #2 cryptocurrency has plummeted by more than 8.24% against the US dollar over the last 24 hours, and is flagging behind Bitcoin by 3.50%. Trading volume has also fallen by $1.6 Billion, as traders undoubtedly flock to stablecoin assets to secure their fiat value.
Despite a highly promising golden crossover appearing on the 1D ETH/USD chart over the last 4 days, the price action has begun consolidating inside a bearish descending triangle pattern. From this, we could expect to see the short-term price trend decline further before Ethereum continues its ascent towards $300.
Ethereum (ETH) Price Analysis
On the 1D ETH/USD chart we can see that the asset has managed to retrace back to the key 0.236 fibonacci level at $233.92, which had been a strong supporting price point for ETH during its last dip on May 18.
If today’s candle closes at this level then it will cement the 0.236 fibonacci level as a base support, which will give us the start of a bearish descending triangle pattern.
These particular patterns are characterised by a flat base support and a sloping resistance line which eventually meet. At the point of maximum consolidation, the price action typically breaks bearish after sellers finally overpower the base support.
Depending on the severity of the bearish breakout, we could see the golden crossover between the 50 and 200 EMA lines - which formed on May 19 - revert to a death cross as the short-term buying momentum reverses. This would potentially spell doom for Ethereum’s short to mid-term prospects, as a death cross would signal to traders that the asset is likely to continue declining sharply.
Looking at the 1D MACD indicator, we can see that the 12-MA is still holding above the 26-MA at the moment and that both moving averages are still high above the signal line. However, the 12-MA is now starting to diverge downwards as ETH continues to correct. Buying volume on the histogram is also starting to dwindle towards the signal line, which is another worrying signal for ETH buyers.
For now, all eyes will be on the $233 support at the 0.236 fibonacci level. If this breaks, then it is more than likely that Ethereum will extend its losses downward to the next fibonacci level below at $204.
If it holds however, then we may see renewed bullish support reject the bearish pattern and launch an upside recovery. In order for this to be confirmed, we would need to see candles close above the downtrending resistance. If this happens, it is also likely that the price action will temporarily throw back on to the previous resistance and find new support there, before pushing on towards a new high.