- Ether's immediate bullish case has strengthened with the breakout above the widely-tracked 38.2% Fibonacci retracement hurdle at $2,742.
- The hourly chart bull flag breakout suggests scope for a rally above $3,000, although low volumes are a cause for concern.
- A failed breakout may bring a pullback to support at $2,500.
Ether topped a key price hurdle early Wednesday in a bid to extend its two-day winning trend.
The native token of Ethereum's blockchain crossed above $2,742, the 38.2% Fibonacci retracement of the recent price crash, having put in a low of $1,728 earlier this week.
Fibonacci retracements - 23.6%, 38.2%, 61.8%, and 78.6% - are horizontal lines, representing how much of the last move (bullish/bearish) has been erased. According to Investopedia, these figures are found throughout nature and work as support and resistance levels in financial markets.
The 38.2% and 61.8% are the most widely followed, with a breakout above the former usually seen as a good time to build long exposure by traders. Thus, a crossover above the 38.2% hurdle is said to shift focus to the 61.8% retracement.
Ether's daily chart shows $3,379 is the 61.8% Fibonacci retracement of the recent decline.
Price chart: Daily
If ether succeeds in establishing a new base above $2,742 (the 38.2% retracement) over the next few hours, the 61.8% hurdle at $3,379 will come into view.
Alternatively, a failure to keep gains above $2,742 would allow slippage to the 5-day MA (simple moving average) support at $2,500.
As of now, the bearish scenario looks unlikely, as the hourly chart is showing a bullish continuation pattern.
Price chart: Hourly
Ether confirmed a flag breakout early today, signaling an end of the brief consolidation in the range of $2,760 to $2,400 and a continuation of the recovery rally.
The pattern, however, needs validation in the form of an uptick in trading volumes. Should that happen, the case for a rally to the 61.8% Fibonacci retracement would strengthen.
The MACD histogram has already crossed into the positive territory, signaling a bullish shift in momentum.
The bias would turn bearish if the pattern fails - prices fall back into the flag. That would expose subsequent supports at $2,100.
This is a guest post. Investing in cryptocurrencies is speculative and investors should carefully conduct all research and diligence before making trades.