Ethereum Creates Bullish Engulfing Candlestick in May – Analyzing Prior Instances and Outcomes for ETH

Key Takeaways

• After a bearish April, Ethereum created a bullish engulfing monthly candlestick in May.
• The ETH price trades 22% below its all-time high price of $4,868, reached in November 2021.
• How has the ETH price reacted to the previous times it made bullish engulfing candlesticks?

The Ethereum price has increased over 35% since its local bottom of $2,815 on May 1, breaking out from a descending resistance trend line on May 20. Despite the breakout, the rally has stalled since May 27.

Nevertheless, Ethereum’s performance has been positive in May. With this in mind, we take a look at the previous instances when Ethereum created bullish engulfing candlesticks to attempt to determine what is likely to happen.

Ethereum Creates Bullish Engulfing Candlestick

The Ethereum  price reached its yearly high in February and then corrected in March, falling to a low of $2,845. This created a bearish engulfing candlestick, often considered a sign of a bearish trend.

However, the price recovered in May, creating a bullish engulfing candlestick (white icon), negating the previous bearish signs.

There have been four other instances (green icons) when the ETH price has created a bullish engulfing candlestick in the monthly time frame. These happened in May 2016, August 2017, February 2019 and January 2023.

In 2016, the price reached a local top the next month before falling. In 2017, it did so after five months. Then, in 2019, ETH reached a top four months after the bullish candlestick, and it did the same after three months in 2023.

So, the Ethereum price has reached a major top between one and five months each time it previously created a bullish engulfing candlestick.

Ethereum’s Wave Count Aligns With Candlestick

The wave count from the 3-day aligns with the projection from the monthly bullish engulfing candlestick. According to the wave count, the ETH price is in the fifth and final sub-wave (black) of wave three (white).

So, if the count is accurate, the ETH price will reach a top in the upcoming months and begin a notable correction. This is in line with what happened after the previous bullish engulfing candlesticks.

If this is the case, a likely target for the top of the movement is between $4,700 and $4,864. The lower portion of the target is created by giving sub-wave five 0.618 times the length of sub-waves one and three (white). The 1.61 external Fibonacci retracement of sub-wave four creates the upper limit of the target.

Ethereum’s all-time high is at $4,868, so it is not certain if this increase will lead to a new all-time high or will barely fail to do so.

The possibility of a top is supported by the weekly MACD and RSI (green). Both indicators are in the process of generating bearish divergences. These will be confirmed if the price creates a higher high (green lines).

So, the most likely outlook is a higher high in June and possibly July. This can be followed by a significant correction as part of a long-term wave four.

Ethereum to Reach Top in the Upcoming Months

The Ethereum price created a bullish engulfing candlestick in May, considered a sign of a positive trend. However, in each of the previous four times it did this, the price reaches a local top at most five months after the candlestick. The wave count and indicator readings align with this possibility. So, the most likely future outlook is a continued increase in June and possibly July followed by a lengthy correction.