Resistance areas are very significant in determining the scope of a cryptocurrency’s, such as Ethereum’s, price movements. Once a resistance area is broken, it is likely to act as support afterward — and vice versa. A breakout above a resistance area often triggers rapid price increases.
The Ethereum price was rejected by the $360 resistance area on June 27. A breakout above this area could trigger a rapid increase towards new highs. Until the breakout, ETH is likely to accumulate between the current price and the resistance area.
Cryptocurrency analyst @cryptodude stated that Ethereum is his favorite chart and will be remembered in the future as an essential chart.
— CryptoDude (@cryptodude999) October 18, 2019
He also outlined a resistance line at $360 that has been significant in both May-November 2017 and in June 2019. This might suggest that a breakout above it could cause a similar movement to that in 2017. Why does he think that? Let’s take a deep dive and analyze the possibilities.
Ethereum Price Resistance Area
Looking at the weekly Ethereum chart, we can see that the $360 area acted as resistance throughout May-November 2017.
Afterward, it supported the price in April 2018 — before ETH broke down.
Finally, the area acted as resistance again on June 27, the current 2019 high.
However, there is one big dissimilarity between these two movements.
Throughout the 2017 movement, ETH created an ascending support line — which held until the price broke out. On the contrary, in the 2019 movement, the support line held for several months before the price broke down. Afterward, ETH came back to validate it as resistance before moving downward. This is a common movement after a breakdown and often indicates that further decreases are in store.
Looking at the daily chart, we can see that the Ethereum price is trading inside a descending wedge — quickly approaching the end of the projected pattern.
We can also see that a bearish cross between the 100- and 200-day moving averages (MA) has occurred, signifying that further decreases are ahead.
Therefore, we could see the scenario in which the Ethereum price decreases to the end of the wedge, breaks out, and then continues an upward movement.
So, a very rough outline of how the price movement might follow is given below:
- The Ethereum price will break out after possibly decreasing to $150.
- After the breakout, it will create another ascending support line similar to that in 2017 — but less steep.
- Eventually, it will break out above the resistance area and initiates a rapid increase.
If we try to make a comparison to the emotional phases of the market cycle, this fits right in our hypothesis laid out in one of our previous articles.
Do you think Ethereum will break out from the $360 resistance area? Let us know in the comments below.
[Disclaimer: This article is not trading advice and should not be construed as such. Always consult a trained financial professional before investing in cryptocurrencies, as the market is particularly volatile.]
Images courtesy of Twitter, TradingView.