Disclaimer: The conclusions of the following analysis are the sole opinion of the author and should not be considered investment advice.
Over a period of two days, Ethereum [ETH] Has managed to register gains of close to 12%. The price has spent a good part of the last day consolidating below resistance. At the same time, volume indicators are showing a decent amount of demand behind Ethereum’s rally.
A major resistance area for ETH was just around the corner. The Ethereum merge is also near, and most market participants have been bullishly deployed over the past 24 hours.
ETH- 1-Hour Chart
Earlier this week, ETH faced a strong rejection at the $1,680 mark and declined to $1,500. However, its recovery was rapid. The price tested the $1,500 mark twice in a span of a few hours and reversed its direction. The $1,650 mark posed a challenge for buyers, but it was defeated in due course.
Despite the volatility in the last two weeks, trading opportunities were available. Since August 29, the price has risen. But, on zooming out, it can be seen that the long term market structure remained relatively bearish. The $1,700-$1,720 supply zone is yet to be conquered. So soon the opportunity of shorting may come.
The resistance belt highlighted in red could be used to sell Ethereum until the price can break the $1,720 area and flip it for demand.
argument
The Relative Strength Index (RSI) was at 65 and the recent bounce meant that the bullish momentum was dominating. However, the RSI was in the process of making lower highs as compared to the previous day. In the same period, the price has climbed above $1,650. This could soon develop into a bearish divergence on the hourly chart.
The Stochastic RSI formed a bullish crossover and moved higher. On-balance volume (OBV) has also made consistent high lows over the past ten days. Hence, there was evidence of demand behind the rally.
conclusion
A pullback can be seen in the development of divergence but it does not indicate a trend reversal. Demand over the past ten days meant a move higher was possible. If the $1720 area can be broken, a retest of the former resistance area could create a buying opportunity.