- Summary:
- Ethereum price has gained nearly 10 percent in the last week, and the formation of an inverse head-and-shoulders pattern signals bullish hold.
Ethereum price extended its upside on Monday, hitting a two-week high of $3,697 after rising by 0.8% at press time. The crypto coin has gained more than 9% in the last week and stability above the $3,500 level reiterates the viability of retesting $4,000 mark in the coming days. This is affirmed by the formation of an inverse head-and-shoulders pattern which could potentially break the $5k ceiling.
Inverse Head and Shoulders Pattern Suggests 56% ETH Price Upside
Ethereum price has formed an inverse head-and-shoulders pattern on the weekly chart. As seen on the chart below, this is a potential trend reversal pattern that consists of three successive troughs.
The left shoulder represents the initial drop, with a short period of control by the buyers. That transitioned to a deeper drop, which was driven by a stronger downward momentum, leading to the formation of an inverted “head”. The right shoulder is a lower high and is almost as deep as the left shoulder.
The pattern’s neckline connects the two shoulders and aligns with the highest point on the head. Note that the pattern will be complete when the price breaks above the neckline after forming the right shoulder. We use the distance from the head’s tip to the neckline as a yardstick to estimate the price target on the upside.
Using that approach on the ETHUSD price chart gives us a potential gain of $1,683.30. Extrapolating that from the neckline results in a price target of $5,717. That infers a gain of 56.75% from the current price. Also, such a gain would translate into a 17% upside above the ETH price all-time high of $4,878.
To trade the head-and-shoulders pattern, one needs for the confirmation of the upside breakout above the neckline. You should also limit the downside in case of a trend reversal by placing a stop loss just below the right shoulder. Furthermore, watch out for the price momentum near key psychological barriers for Ethereum price like the $4,000, $4,500 and $5,000 levels.
