Last Friday, Ethereum opened with a large negative gap, breaking below the critical support territory of 1685, which had been acting as a floor since May 12. Subsequently, the crypto kept drifting south, and today, it hit support at 1010 before rebounding somewhat.
Overall, Ethereum is trading well below the downside line drawn from the high of May 15 and below the downtrend line taken from the high of April. 3. Thus, even if the price rebounds somewhat, we will see this as a corrective bounce before the next leg south.
We believe that the bears could retake charge from near the 1270 barrier, marked by the high of Jun. 14, or from near the 1395 territory, defined as a resistance by the inside swing low of Mar. 1. This could result in another leg south and another test near the 1010 line, the break of which would confirm a forthcoming lower low and may see scope for declines towards the 675 territory, defined as a support by the inside swing high of Dec. 17, 2020.
Shifting attention to our short-term oscillators, we see that the RSI lies within its below-30 zone, but it has moved higher and appears ready to poke its nose above that 30 line. The MACD, although deep into its negative territory, lies above its trigger line. Both indicators detect strong downside momentum, but one that has started to slow down.
In our view, this adds credence to the case of a possible rebound before the next leg south. In our view, a bullish reversal will be the case upon a break above 2195, marked by the inside swing low of May 10. This may confirm the break above the downside line taken from the high of Apr. 3 and could initially pave the way towards the high of May 10, at around 2455.
If the bulls are unwilling to stop there, then we may see them pushing towards the 2745 territory, which acted as support between Apr. 26 and May 3.