The bulls are hopeful that Ethereum’s native currency Ether (ETH), will rebound by as much as 60% over the next sessions.
In a Monday tweet, Matthew Hyland, an independent analyst on the chain, suggested that prices could rise to $6,500 or more from their current levels of $4,100.
Perfect Cup and Handle Retest
Hyland’s chart shows Ether going back to the point of resistance in its old Cup and Handle pattern (the yellow horizontal lines in the chart below), a corrective move that began after the cryptocurrency hit its record high of $48,867 on Nov. 10. (Data from Coinbase).
After testing the Cup-and-Handle resistance as an interim support, Ether experienced a soft rebound. This raises possibilities for a longer upside move.
Weekly chart of the ETH/USD exchange rate. Source: TradingView, Matthew Hyland
Detail: Typically, additional confirmation is required for the first attempt at a breakout from bullish technical setups.
These early gains can trap two types of buyers: longs who enter the pattern deep hoping for a breakout (which fails) and longs who chase the breakout but lose their small profit after sudden bearish reversals which prompts them to defend their positions.
The tables can turn when the decline slows down midway. This either leads to sideways or full-fledged recovery. Short sellers lose confidence while long-term bullish technical investors gain conviction.
Positive rebound creates a bullish feedback loop, which prompts the price to prepare for a strong uptrend. Hyland suggested that Ether’s retesting of the “huge Cup-and-handle pattern” resistance was perfect as support. This could be a cue for a sharp rebound.
Why spend $6.5K
When the price breaks through its resistance level and trade volumes increase, it is considered a Cup-and-Handle pattern’s buy point.
Traders often estimate their profit target by measuring distance between the Cup’s right tip and its bottom, then adding that number to the buy price.
Weekly price chart for ETH/USD with Cup and Handle profit target. Source: TradingView
The Cup’s maximum depth of nearly $2,500 is its breakout point, which is approximately $4,100. The pattern’s breakout target is now at $6,500. Harvard research shows Cup and Handles have a 68% and 65% success rate in stock and forex markets, respectively.
Related: Analysts believe an ‘impulse move could push Ethereum’s price up to $6K-$14K
However, breaking below pattern’s resistance level — which coincides with multi-month rising trendline supports — could lead to the invalidation of the bullish setup. This could lead to Ether prices nearing $3,090.
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