The cryptocurrency market is showing a slight recovery following yesterday's significant selloff, which resulted in over $1 billion in liquidations. During this downturn, Ethereum (ETH) reached a low of $3,679 before buyers intervened. ETH has since rebounded and is currently trading around $3,860, marking an increase of more than 2% for the day.
Beyond this immediate recovery, the technical indicators on lower timeframes suggest the possibility of a more substantial bullish reversal.
Descending Broadening Wedge Pattern Observed
On the 1-hour chart, Ethereum has been forming a descending broadening wedge. This pattern is typically recognized as a bullish reversal formation that often appears during corrective downtrends. The presence of this structure commonly indicates a waning bearish momentum and can precede a trend reversal.
Recently, ETH's price decline brought it to the lower boundary of this wedge, near the $3,679 level, where a notable surge in buying pressure was observed. This support zone has served as a rebound area multiple times in recent sessions. Following this interaction with support, ETH experienced a bounce and is now trading around $3,859, consolidating just below its 200-hour moving average (MA), which is situated at $3,951.
The convergence of the wedge's support level and this significant moving average creates a critical juncture, representing a key battleground between buyers and sellers.
Future Outlook for Ethereum
If Ethereum successfully maintains its position above the wedge support and achieves a decisive close above the 200-hour MA, it could facilitate an upward movement towards the wedge's upper resistance trendline. This scenario could potentially lead to a breakout.
A confirmed breakout, followed by a successful retest of the broken resistance, might open the possibility for an extended rally, with targets potentially in the $4,100 to $4,200 range.
Conversely, if ETH is unable to sustain its price above the $3,800 level, it is possible that the price may revisit the lower support trendline once more before any substantial upward price action can be initiated.