Renowned market veteran Peter Brandt highlights concerning patterns for Ethereum (ETH), suggesting it may be on the brink of a significant decline.
Brandt discussed the potential for Ethereum to drop to a low the market has not witnessed since the fourth quarter of last year. The analyst backed his report with two charts of ETH’s price movements on different time frames.
Ethereum Price Action Breakdown
The 240-minute chart displays a rising wedge formation. This pattern often indicates a bearish reversal. The chart shows Ethereum’s price gradually climbing within the converging trendlines. However, this wedge usually leads to a breakout to the downside.
Interestingly, amid the uptrend within the converging trendlines, the Ethereum price retested a breakout point this week when it spiked above $2,700. Nonetheless, the upsurge cooled, suggesting a lack of bullish momentum to push prices higher.
Moreover, the 18-period simple moving average (SMA) reflects the resistance Ethereum faces at the upper boundary of this wedge. The declining average directional index (ADX) further supports the weakening trend, as a low ADX indicates a lack of strong directional movement.
The convergence of the price towards the upper resistance alongside the low ADX reveals that a breakdown from the wedge is likely, making this pattern an ideal setup for a short trade.
ETH Bearish Rectangle Pattern
In the daily chart, Brandt identified a completed five-month rectangle formation. Ethereum’s price broke down from this rectangle on Aug. 4, and the current market activity appears to be a retest of that breakdown level, around $2,933.
Notably, a successful retest followed by a further decline would confirm the rectangle’s bearish implications. This would align with the intraday rising wedge seen in the 240-minute chart, reinforcing the overall bearish outlook.
If the rectangle’s implications play out, ETH could be set for a fall towards $1,645, a target derived from the height of the rectangle projected downward from the breakdown point. The last time XRP saw the $1,600 level was in October 2023.
Meanwhile, the 30-day average true range (ATR) indicator reflects increased volatility, hinting at the potential for significant price swings.
The ATR reading of 181.02 suggests that Ethereum could experience sharp movements in either direction. However, the bearish patterns identified by Brandt lead him to anticipate a move downward rather than a recovery.
Brandt Advises Risk Management
He emphasized that despite the strong technical signals, patterns fail to deliver their expected outcomes more than 50% of the time. Hence, he advised setting a stop-loss just above $2,961. This level, slightly above the current resistance, would limit losses if Ethereum defies the bearish setup and moves higher.
According to the analyst, the trade offers a favorable risk-to-reward ratio of over 3:1. However, he confirmed that he bases his trading philosophy on accepting losses as a natural part of the process. At press time, Ethereum changes hands at $2,602, down 2.35% this morning.
Disclaimer: This content is informational and should not be considered financial advice. The views expressed in this article may include the author's personal opinions and do not reflect The Crypto Basic’s opinion. Readers are encouraged to do thorough research before making any investment decisions. The Crypto Basic is not responsible for any financial losses.
