Ethereum recently formed an inverse head and shoulders pattern to signal that it’s done with the downtrend, but it took several attempts to break the neckline. An upside move finally occurred recently to confirm that an uptrend is underway.
The chart pattern spans $450 to $500 so the resulting rally could be at least the same height. The 100 SMA is below the longer-term 200 SMA for now, but the gap has narrowed enough to show that a bullish crossover is imminent.
In that case, the path of least resistance would be to the upside, which means that the rally could carry on. Ethereum already moved above these dynamic inflection points to confirm that bullish momentum is in play.
In addition, price appears to be forming a tiny bullish flag, which is typically seen as a continuation pattern. However, RSI is already dipping into overbought territory and looks ready to turn south, possibly dragging ethereum back down.
Stochastic has some room to climb but is also nearing the overbought region to signal exhaustion among buyers. A quick pullback to the broken neckline around $500 could ensue to gather more bullish energy.
Cryptocurrencies are in a positive mood after New York’s Department of Financial Services granted Square a virtual currency license, allowing the clients of its Cash mobile app to buy bitcoin in the state. Cash has 7 million monthly active users, according to its first quarter earnings call.
To top it off, dollar demand could tick lower on Trump’s latest threats of more tariffs on China. In a statement, the White House said “If China refuses to change its practices, and also if it insists on going forward with the new tariffs that it has recently announced.”
With that, ethereum could see more upside from here, particularly after a senior SEC official also noted last week that this digital asset is not a security to be subject to regulation like stocks and bonds.