Ethereum ‘head & shoulders’ chart pattern puts ETH price at risk of dropping to $2K

After falling below $2,954 support, Ethereum’s native token Ether may drop to a two month low. This is based on a classic trading pattern.

$2,954 represents a neckline that creates a head-and-shoulders setup. The support level is a floor between three peaks. The middle peak (HEAD), appears higher than the two lower ones (SHOULDERS).

A breach below $2,954 signals a trend reversal. This means that ETH/USD could fall by the same length as the distance between the neckline and the peak of the head.

Daily price chart for ETH/USD featuring the head and shoulders pattern. Source: Peter Brandt

Peter Brandt, CEO at global trading firm Factor LLC, discussed the bearish trend late Monday. He noted that a successful break below $2,954 could cause prices to crash to around $2,000.

“I am not saying that I believe it and I am not saying that I do not believe it. But, if I own ETH, I will have to deal. It is possible that H&S exists.

Samurai Trading Academy research shows that head and shoulders achieve their target about 85% of all the time.

Bullish outlook

Ether was trading at $2,805 by 00:22 UTC (its lowest level since Aug 7). The cryptocurrency recovered to an intraday high level of $3,104, and was trading at around $3,000 as of the time of writing.

These price swings were part of a trend to correct ETH/USD’s sessional high at $4,030 on September 3. The pair fell as much as 25.34% initially to reach $3,009. The pair recovered to $3,675 after that.

However, bulls lost control once again at the start of this week due to a wave selling triggered in China’s highly indebted property industry. This affected crypto and traditional markets.

Ether fell by 10.58% Monday

Analysts believe that the Ethereum token will recover if it holds above its historical support levels. PostyXBT, a pseudonymous chartist, mentioned $2,850 to be “an important level” that maintained Ether’s bullish bias.

Twitterati stated that it was “good to see ETH testing a critical level of support at he same time as BTC.”

“Similar in value to BTC at $40k. $2850 must be held.”

PostyXBT’s chart layout envisioned that ETH/USD would retest $4,000 during the next sessions.

Weekly price chart for Ethereum/USD with $2,850 levels as support and resistence. Source: TradingView.com and PostyXBT

Another pseudonymous analyst, the Crypto Monk, said that the recent declines had pushed out weak traders and provided opportunities for strong hands, to buy Ether and send it to an all-time high.

Related: Bitcoin is in “good shape” as long as the BTC price remains above $40K — Mike Novogratz

Brandt pointed out that the drop in ETH/USD could lead to a “bear trap”, a technical pattern where an asset’s price performance signals a end of a bullish market. If spot ETH/USD rates rise, traders who have leveraged short positions may suffer losses.

Brandt wrote, “I have a strong suspect that recent weakness especially overnight successfully washed away weak longs, and might have trapped some bears.”

“Of course price movements would have to confirm this.” You should do your research before making any investment or trading decision.

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