The breakdown of the ascending trendline corresponding with previous bear market lows looks horrible, one portfolio manager said.
The bear market in ether (ETH) is forecast to intensify as the cryptocurrency has dipped below pivotal support.
Ether, the second-largest cryptocurrency by market value, fell 17% last month, breaching an ascending trendline connecting June and October lows.
The trendline was expected to put a floor under ether, considering its extended version corresponds with major market bottoms registered in March 2020 and December 2016, according to the log-scaled weekly chart provided by TradingView.
Therefore, the downside break of the trendline is keeping Decentral Park Capital’s portfolio manager Lewis Harland awake at night.
“No one is talking about this – ether has flipped a multi-bear cycle trendline support into resistance,” Lewis Harland, a portfolio manager at Decentral Park Capital, told CoinDesk, adding the breakdown “looks horrible.”
A trendline is a straight line connecting two or more price points, usually swing highs or lows, to illustrate the direction of the market trend. An ascending trendline indicates the path of least resistance is to the higher side. Therefore, a breakdown of the ascending trendline is considered an early warning of an impending bearish trend change.
Traders often extend the ascending trendline into the past to see if it corresponds with major turning points. If it does, as in ETH’s case, the trendline and its eventual violation are considered important.
A logarithmic scale chart plots values between two points according to the percent change rather than the absolute change and is suitable for data with vast value disparity. For instance, ether has gone from being valued in two digits in March 2020 to four digits at press time. Chart analysts use log-scaled charts to analyze long-term trends.
The trendline is now acting as resistance, capping the upside in ether.
“ETH is now using multi-cycle support as resistance. It has never occurred in ether’s history and likely speaks to this new market regime,” Harland noted.
Ether might run into stronger selling pressure should the situation persist.
At this point, one might wonder about an ideal time to turn bullish on cryptocurrency. Per crypto options trading firm QCP Capital, ether needs to clear a line of resistance from its peak price of $4,868 registered in November last year to turn bullish.
At press time, the trendline resistance was located at around $1,400, while ether changed hands at $$1,240.
Source: Crypto Insider