Will Ethereum Drop to $2.1K After Rejection at $2.7K?

Ethereum has faced rejection at the critical 100-day MA level of $2.7K, signaling a potential bull trap. This price movement suggests a dominance of sellers, with the asset likely to proceed with its downward consolidation towards the $2.1K mark.

Technical Analysis

By Shayan

The Daily Chart

Recently, Ethereum saw an upward movement that broke above the 100-day moving average at $2.7K, as well as the neckline of an inverted head and shoulders formation, triggering a short liquidation event. Initially, this surge appeared bullish as it propelled the price upward. However, a subsequent rejection at the $2.7K resistance has resulted in a 12% drop, pushing the price below both the 100-day MA and the neckline.

This indicates that the breakout was not genuine, creating a classic bull trap and underscoring the increasing power of sellers. Ethereum is currently consolidating near the $2.5K support zone, but further decline is anticipated with the key target set at the $2.1K support level.

The 4-Hour Chart

On the 4-hour chart, ETH’s brief rise past the 0.618 Fibonacci level ($2.7K) encountered significant selling pressure, likely from institutional players. These market participants capitalized on the liquidity available above $2.7K, executing sell orders in a calculated move that resulted in a sharp price downturn.

Ethereum has since retraced to the lower boundary of its ascending flag pattern, currently resting around the $2.4K zone. This level may offer short-term support and could initiate consolidation within the flag.

ETH could maintain its position at this level temporarily, entering a consolidation phase before its next move is determined. If buying momentum increases, a possible retest of the $2.7K resistance could take place. Conversely, if the price breaks below the $2.4K support, this would likely lead to intensified bearish momentum, with Ethereum targeting the $2.1K critical support as its next primary objective.

Onchain Analysis

By Shayan

The notable rejection at the $2.7K resistance level delineates an area marked by a high concentration of short positions. Analyzing the futures market reveals the underlying mechanics, suggesting that institutional investors likely leveraged this liquidity pool to trigger liquidations and execute their sell orders.

This calculated strategy by institutional players pushed Ethereum’s price up temporarily, only for it to face rejection and start a downward trajectory.

The concentration of liquidity now shifts below the $2.4K support level, suggesting that ETH’s next potential target in the mid-term is this area. The significant liquidity below this threshold renders it an appealing zone for traders, indicating that Ethereum may continue its descent towards the $2.4K region, if not beyond, as part of its corrective phase.

Considering the technical framework and anticipated market behaviors, Ethereum is likely to maintain downward pressure in the forthcoming days, with a potential target set below $2.4K.