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Ethereum Price Bounces, Reclaims $3,000 – Is ETH Downtrend Finally Over?

Last Updated May 20, 2024 2:11 PM
Valdrin Tahiri
Last Updated May 20, 2024 2:11 PM
By Valdrin Tahiri
Verified by Peter Henn

Key Takeaways

  • The Ethereum price bounced at a long-term ascending support trend line existing for over 200 days.
  • There are similarities between the ongoing correction and that of between April and September 2023.
  • Ethereum’s price movement leans bullish due to the reclaim of a horizontal and diagonal resistance.

The Ethereum price has corrected for 63 days. On May 14, it fell to its lowest daily close since February, also breaking down below horizontal support. After its bearish close, the Ethereum price fell to a low of $2,863 on May 14 and bounced the next day.

ETH has increased since its low, reclaiming a horizontal support area and breaking out from a diagonal one. These are both signs that the correction is over and a new upward movement has started. If this is the case, how long will the Ethereum price continue increasing?

Ethereum Bounces – Reclaims Support

The ETH price had fallen under a descending resistance trend line since April 9. The trend line caused three rejections, the most recent on May 16 (red icon). However, the price bounced the next day, validating the $2,950 area as support and breaking out from the resistance trend line the next day. This is a sign the correction is finally over.

An RSI increase above 50 complemented the increase. The RSI movement supports the breakout and is the highest since the resistance trend line began. So, it aligns with the prediction that the correction is over.

Ethereum Price Movement
ETH/USD Daily Chart | Credit: TradingView

As for the wave count, the most likely one shows a completed A-B-C corrective structure. In it, wave C was an ending diagonal. The sub-wave count (black) shows truncation in sub-wave five. This means bears did not have the strength to push the price further down. Instead, a reversal took place.

Wave Count
ETH/USD Daily Chart | Credit: TradingView

If this is the accurate count, ETH will be expected to increase rapidly and reach new highs. Closing above $3,100 will go a long way in confirming this outlook, making $3,700 the next important resistance.

Ethereum’s Daily Close Puts Long-Term Support at Risk

The ETH price has fallen since reaching a yearly high of $4,093 on March 12. The decrease led to a low of $2,817, a drop of 31% since the high. While ETH bounced afterward, it failed to sustain the increase. Rather, Ethereum reached a daily close of $2,881 on May 14. This was the lowest daily close since February.

While the daily close is a bearish sign, the more important development is the possibility of a breakdown below a 216-day ascending support trend line. The trend line has existed since October 2023, catalyzing a 170% upward movement.

Ethereum Risks Support Breakdown
ETH/USDT Daily Chart | Credit: TradingView

Since the support has existed for such a long period of time, a breakdown from it would be a strong bearish signal, potentially indicating the entire upward movement has ended.

Technical indicators give mixed readings. While both the RSI and MACD have generated bullish divergences (green), the RSI is below 50 and the MACD is negative, both signs of a bearish trend.

ETH Short-Term Resistance
ETH/USDT Daily Chart | Credit: TradingView

A closer look at the movement over the past month shows the ETH price is falling under a descending resistance trend line since April 8. The trend line has caused numerous rejections (red icons). Additionally, ETH decreased below the $2,950 horizontal area, which is now expected to provide resistance.

The trend line also coincides with the $2,950 area, so the trend cannot be considered bullish until the price breaks out. In that case, the next resistance will be at $3,270.

ETH Price Prediction: Does Wave Count Show Bottom?

The wave count shows that ETH is in a long-term wave three (white) of its increase that started in April 2022. Wave three has extended, as noted by the sub-wave count (black). If the count is accurate, ETH  is working on finishing sub-wave four, after which another upward movement will follow.

There are similarities between the sub-wave four and sub-wave two corrections. More specifically, they were both close to 30% in length, though the sub-wave two one as nearly three times as long. This is not irregular, since there should be alternation between these two waves, and Ethereum’s case, sub-wave four is sharp while sub-wave two is not.

Ethereum Wave Count
ETH/USDT Weekly Chart | Credit: TradingView

Despite the nearly identical amounts of decrease, they drop relative to the preceding increase is different. In sub-wave two, the ETH price retraced to the 0.618 Fibonacci retracement level, while it has only reached the 0.382 level in the current correction.

This is also in line with the usual wave four characteristic of the correction being shallower than that of wave two.

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

The short-term count leans bullish. The most likely outlook is an A-B-C correction where wave C developed into an ending diagonal, hence the wedge shape. The sub-waves are in black. If this count is accurate, ETH will undergo another decrease toward $2,670, giving waves A:C a 1:1 ratio.

At first glance, this could cause a breakdown from the long-term ascending support trend line. However, it is possible ETH will create a long lower wick similar to May 1 (green icon), touching the target but not closing below it.

Decisive Week Ahead

There are mixed signs regarding the Ethereum price chart. This is true in both indicator readings and the price action. The Ethereum price action is leaning bearish because of its daily close. On the other hand, the wave count leans slightly bullish.

A daily close above the $2,950 area and resistance trend line will favor the bullish outlook. Conversely, a close below the long-term ascending support trend line will point to the bears being in control.

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