It took Ethereum’s native token Ether (ETH) only two months to recover from a brutal selloff at the beginning of 2022.
ETH price breaks out but risks remain
ETH price reached near $3,350 on March 28 after rallying by over 30% in just two weeks, and by more than 50% when measured from its year-to-date low of around $2,160, established Jan. 24.
In doing so, the ETH/USD pair may have also “busted” what earlier appeared to be a bearish continuation setup, called the “symmetrical triangle.”
ETH/USD daily price chart featuring ‘symmetrical triangle’ reversal. Source: TradingView
“Busted patterns (when the breakout is in one direction only to see price reverse and breakout in the opposite direction) often result in strong moves,” writes Tom Bulkowski, a veteran market analyst. This raises hopes that Ether can rally to the triangle pattern’s target near $4,000 in the coming days.
ETH fakeout risks
However, the market analyst also notes that symmetrical triangles have a tendency to “double-bust,” wherein the final breakout direction comes out to be the same as the original one.
A double-bust scenario means Ether’s uptrend could exhaust soon, leading to a reversal toward the symmetrical triangle’s top. The downside outlook appears as ETH retests its support-turned-resistance range that served as a selloff area for traders in the January-February session, as shown in the chart below.
ETH/USD daily price chart featuring double-bust scenario. Source: TradingView
As a result, another selloff near the range could the trigger double-bust risks, prompting Ether’s price to drop toward the symmetrical triangle’s downside target near $1,800, set after measuring widest distance between the triangle’s upper and lower trendline and adding it to the breakout point.
Interestingly, the $1,800-level was instrumental in capping Ethereum’s downside attempts during the selloff witnessed in May-July 2021.
Conversely, the double-bust setup will be invalidated if the price decisively rises above the resistance range. PostXBT, an independent market analyst, further noted that flipping levels around $3,350 back to support could raise ETH’s possibilities to hit $4,000.
Simultaneously, Ether still faces downside risks due to its strong correlation with the U.S. stock market and Bitcoin (BTC). As reported earlier, BTC’s correlation with stocks is being closely watched this week as BTC/USD challenges key areas of resistance.
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