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Ethereum Fails to Break $4,000, Creates Lower High – Should ETH Bulls Be Worried?

Last Updated 2 days ago
Valdrin Tahiri
Last Updated 2 days ago

Key Takeaways

  • Ethereum’s price created a lower high in the weekly time frame in March and May.
  • On-chain indicators do not show overvalued readings yet similar to what they did in 2021.
  • Will Ethereum reach a new yearly high in June, or has it already started its correction?

The Ethereum price started a rapid upward movement on May 20, increasing nearly 20% in a single day, one of the highest-ever daily increases. At that rate of increase, it seemed very likely that ETH will reach a new yearly high soon. However, this was not the case. To the contrary, the Ethereum rally has stalled since May 27, creating a lower high.

The strength at the end of May combined with the weakness in the start of June leads to the question: Will Ethereum finally reach a new yearly high, or is more downside likely before that happens?

What Does Ethereum’s Lower High Mean?

The weekly time frame analysis shows the ETH price has fallen since its yearly high of $4,093 in March. After bouncing in April, Ethereum began an upward movement which created a lower high in May (red icons).

The lower highs were made right at the 0.786 Fibonacci retracement resistance level of $4,010.

Despite the rejection, the ETH price has only created small bearish candlesticks which pale in comparison to the bullish one in the end of May.

Ethereum Weekly Movement
ETH/USDT Weekly Chart | Credit: TradingView

Alongside the price, the MACD and RSI have also created lower highs (green). While the lower highs are a bearish sign, the silver lining is that the indicators have not generated any bearish divergences yet.

The daily time frame price chart shows that after the lower high, Ethereum fell below the 0.618 Fibonacci resistance and horizontal support at $3,610. However, it has not reached a close under it yet. If ETH holds above this level, the trend can still be bullish. If not, a drop to $3,300 will be on the cards.

ETH Price Range
ETH/USDT Daily Chart | Credit: TradingView

Similarly to the weekly time frame, the daily RSI and MACD both give mixed readings. This is because even though the indicators are trending down, they are still in bullish territory, being above 0 and 50, respectively.

What Do On-Chain Readings Say?

On-chain readings for Ethereum  suggest the market top has not been reached yet. The MVRV Z-score, which measured under and overvaluation implies ETH has not reached overvaluation territory yet.

In the 2021 bull run, Ethereum’s MVRV Z-score reached a value of 9 and then a lower high of 4.5. This created a bearish divergence relative to the price. In the current upward movement, the highest MVRV Z-score rating has been reached in tandem with the Ethereum yearly high, meaning it has not created a bearish divergence.

A similar reading is visible in Bitcoin.

Ethereum's MVRV Z-Score
Ethereum MVRV Z-Score | Credit: Santiment

The Spent Output Profit Ratio (SOPR) indicator shows the same thing. The indicator tracks the profit level of all coins moved in a given period. In the 2021 bull run, the highest value was 1.15, which also created a bearish divergence.

In the current upward movement, the highest SOPR value has been 1.09 and there is not bearish divergence in place.

Ethereum SOPR Indicator
Ethereum SOPR | Credit: Glassnode

As a result, on-chain readings suggest the ETH price still has further room to grow.

Ethereum Price Prediction: Wave Count Anticipates New Yearly High

The daily time frame wave count supports the continuing of the increase to a new yearly high. The wave count suggests that ETH completed an A-B-C correction and started a new five-wave upward movement on May 1. In this count, the price of Ethereum is completing wave four.

A likely target for the top of wave five is between $4,690 and $4,871. The 1.61 external Fibonacci retracement of the previous drop creates the upper limit of the target. The lower limit is created by giving wave five the same length as waves one and three combined. A more accurate target can be given once wave four comes to an end.

Short-Term Count
ETH/USD Daily Chart | Credit: TradingView

In regard to the long-term Ethereum count, it is likely the price is in the fifth and final wave of its upward movement (white). This also aligns with the possible short-term wave five extension.

The longer-term count gives a target of $4,656 for the top of the increase. This is only slightly below the all-time high of $4,868 and is in line with the short-term targets.

Long-Term Count
ETH/USD 3-Day Chart | Credit: TradingView

As a result, the most likely wave count suggests ETH will reach a new yearly high soon.

Ethereum Price Upward Trend Not Over Yet

The combination of the short- and long-term price action, on-chain and technical indicator readings and the wave count all suggest the ETH rally is not over yet. Rather, they predict at least another high is likely before a significant correction. A target for this potential high is between $4,650 and $4,850.

Disclaimer
Please note that the contents of this article are not financial or investing advice. The information provided in this article is the author’s opinion only and should not be considered as offering trading or investing recommendations. We do not make any warranties about the completeness, reliability and accuracy of this information. The cryptocurrency market suffers from high volatility and occasional arbitrary movements. Any investor, trader, or regular crypto users should research multiple viewpoints and be familiar with all local regulations before committing to an investment.
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