ETH’s rejection at $2.7k could spell more trouble

Ethereum’s recent rejection of the key resistance region of the 100-day MA level suggests a false breakout and possible short-term correction.

However, a break above this threshold could lead to a bullish surge towards $3,000. The price is expected to consolidate, with $2.4 thousand as a critical support level.

Technical Analysis

By Shayan

The daily chart

Ethereum has recently seen a notable increase in demand and bullish momentum, which has seen the asset test and slightly breach the decisive resistance region formed by the 100-day moving average at $2.7k and the ‘head and shoulders inverted neckline at $2.6k. Despite this brief breach, ETH quickly faced rejection due to significant supply at this level, causing the price to fall below the 100-day MA.

This false breakout hints at a bullish trap, indicating a potential short-term downward consolidation correction period. Ethereum is trading between the 100-day MA and the $2.5K support region, with a break above this resistance likely signaling a sustained uptrend.

The 4 hour chart

On the 4-hour chart, Ethereum rose towards the critical resistance zone bounded by the Fibonacci retracement levels of 0.5 ($2.6K) and 0.618 ($2.7K), which represents a barrier important to buyers. A break above this range could lead to massive short selling and a further rally in prices. However, recent price action indicates intense selling pressure near this area, resulting in a rejection and a halt to the bullish momentum.

If this selling pressure persists, Ethereum will likely enter a mid-term consolidation correction period, targeting the lower end of the flag pattern around the $2.4K threshold. Conversely, if buying pressure builds and the price breaks through the $2.7K resistance, the next target will likely be the substantial $3K resistance, which also coincides with the 200-day moving average.

Onchain analysis

By Shayan

The estimated leverage ratio is an essential metric for assessing the risk futures market participants are willing to take through the use of leverage. A rising ELR typically indicates an increase in leveraged positions, which can amplify market moves in either direction.

The metric has increased in recent months, coinciding with a general downward trend in prices. This suggests that more traders are opening highly leveraged short positions, betting on further declines in Ethereum prices. The market seems bearish on ETH’s future prospects, with many expecting further declines.

With leverage at worrying levels, the futures market is now considered overheated. This leaves Ethereum vulnerable to a possible short-lived event.

In this scenario, if ETH rises unexpectedly, short traders could be forced to cover their positions by buying back ETH, creating an impulsive price spike. The 100-day moving average at $2.7K is a key resistance level. A break above this level would likely lead to massive short selling, driving the price of ETH higher.

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