Ethereum Drops After Reaching Yearly High
The Ethereum (ETH) price experienced a rapid increase since October, breaking out from a descending resistance trend line on November 5. After a rejection from a horizontal resistance area, ETH reached a new yearly high of $2,403 on December 9. However, the price has since fallen sharply and reached a low of $2,145 before bouncing slightly.
RSI Indicator Gives Mixed Readings
The Relative Strength Index (RSI), used to determine whether a market is overbought or oversold, is giving mixed readings for ETH. It fell after generating a bearish divergence but is still above 50.
Weekly Time Frame Offers Bullish Outlook
While the daily time frame provides mixed readings, the weekly time frame is decisively bullish due to the breakout from the long-term $2,000 horizontal resistance area. This breakout is expected to lead to a significant increase in price.
Leveraged Longs Flushed Out
Cryptocurrency trader Daan Crypto suggests that today’s decrease in price was caused by leveraged longs getting flushed out. Overleveraged positions can easily snowball and cause a squeeze when the price fails to move up.
Potential for Upward Movement
With open interest resetting and the weekly RSI moving upwards and above 50, there is potential for the upward movement to continue. The next long-term resistance is at $3,500 in the weekly time frame.
Closing Thoughts: Bullish Outlook with Caution
While there is optimism for further price increases, it should be noted that a weekly close below $2,000 would invalidate the breakout and likely result in a 30% decrease to the next support at $1,500.
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