The ether-US dollar exchange rate (ETH/USD) witnessed a corrective rally to $330 levels today, with prices clocking an intraday high of $345.
As discussed yesterday, the move comes at a time when the market continues to seek direction following China’s decision to ban initial coin offerings (ICO), a use case credited as helping the price of the asset climb over 3,000 percent this year.
Since the vast majority of ICOs are launching tokens issued on top of the ethereum blockchain, this was widely read as a bearish signal, though it remains to be seen how bearish it will ultimately be. So far, it seems, traders are seeing it as a short-time buying opportunity.
At press time, ethereum traded at $330 levels. Week-on-week, the digital currency is down 13.65%. But, on a monthly basis, ether is still up 33%.
So is the corrective rally poised to continue?
The chart above shows a downside breakdown of the rising wedge pattern, which is a bearish pattern that begins wide at the bottom and contracts as prices move higher and the trading range narrows.
It is usually used as a continuation pattern, i.e. the downside break as seen on the chart above signals the continuation of the sell-off. In ETH’s case, the downside break signals continuation of the sell-off from $400.
However, price found support at $326 and rebounded to $335 levels.
As of now, we are in a no man’s land. From the current price, following scenarios could unfold:
- Bearish scenario: A break below $322 would add credence to the rising wedge breakdown and could trigger a sell-off to $293-$290 levels.
- Bullish scenario: Breach of resistance at $341 could see ether re-test resistance at $364 [Aug 21 high].
- On a larger scheme of things, bullish-to-bearish trend reversal is seen below the rising trend line support seen today at $295.
- On the other hand, a daily close above $364 could send ether above $400 levels.