Market Veteran Peter Brandt calls attention to a head and shoulders pattern on the Ethereum chart, indicating higher chances of further price dips from this level.
Brandt’s disclosure coincides with a correction recorded by Ethereum (ETH) on the back of a broader market-wide collapse. Notably, this latest correction follows a previous price surge from Ethereum, which allowed it to retest the pivotal $3,900 price threshold on June 5.
After the retest, the bears took control of the scene. The bearish pressure was triggered by a similar price correction witnessed by Bitcoin (BTC), the leading crypto asset. As Bitcoin crashed below the $68,000 territory, the rest of the market has collapsed, resulting in Ethereum’s drop to the lower portion of the $3,500 zone.
Ethereum Forms a Head and Shoulders Pattern
Despite this recent price decline, chart data confirms that Ethereum remains in an uptrend. However, the formation of the head and shoulders structure, as identified by Brandt, could lead to a reversal toward the downside. A head and shoulders pattern occurs when an asset witnesses three price tops, with the middle one higher than the first and last ones.
One feature of this pattern is that each of the three price tops comes before a substantial drop. Notably, the middle top price represents the head, while the first and second tops represent the shoulders. Analysts confirm the formation of the structure when the price dips below the neckline.
In Brandt’s chart, Ethereum dropped below the neckline when it crashed to $3,501 today. Despite a recovery to $3,540, ETH remains below the neckline. While Brandt identified the head and shoulders pattern, he stressed that the formation is still arguable, suggesting an uncertainty. This indicates that the pattern could be invalidated.
This is# an arguable head and shoulders top. I do NOT short cryptos pic.twitter.com/gjC0OPoJm3
— Peter Brandt (@PeterLBrandt) June 11, 2024
A Possible Price Drop
However, should the formation prevail, Ethereum is likely to record further price dips due to a bearish trend reversal. Crypto analytical account Knepala further confirmed that ETH does not show strength on the daily timeframe, calling attention to multiple momentum indicators.
For instance, the Relative Strength Index (RSI), a momentum oscillator for assessing the strength of Ethereum’s price movements, has collapsed. The RSI has dropped sharply to 44 amid the price slump. Such a sharp decrease confirms that the selling pressure is high and the downward push is strong.
Meanwhile, in the derivatives market, Ethereum is witnessing a surge in volume and a drop in long positions. Per Coinglass data, volume has skyrocketed 156% to $28.35 billion, while the long/short ratio has dropped to 0.8965, indicating an increase in short positions, as traders bet on further declines.
Ethereum currently changes hands at $3,529 as of press time, down 3.8% over the last 24 hours. CryptoQuant author ShayanBTC revealed that the Taker Buy Sell Ratio has also plummeted below 1, suggesting that bears are aggressively selling. According to him, if this metric does not pick up, ETH could see further drops in the short term.
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