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ETH Quietly Breaks above Down Trendline ahead of the Merge

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Primary Chart: ETH Quietly Breaks above Downward Trendline ahead of the Merge
[4-Hour Chart]

Could ETH be strengthening in the short-term ahead of its long-awaited merge event? After crypto market's devastating bear market this year, including the bankruptcies of some crypto firms, an upgrade to ETH's network is set to occur mid-September 2022.

This so-called merge event provides a technical upgrade that enthusiasts claim will make ETH's network more energy efficient and may lay the foundation for reducing the cost of ETH transactions—both of which make it more efficient compared to other networks like BTC. One analyst at Citibank says that the merge may make the network more likely to be adopted by the average person.

With the merge date approaching within two weeks, ETH is showing strength, especially when compared to BTC. Consider the following comparison between MATIC, ETH and BTC, posted a couple days ago, where BTC has shown significance weakness relative to both ETH and MATIC. Both ETH and MATIC have held above key Fibonacci support levels whereas BTC has held below the same Fibonacci levels.

MATIC Remains Stuck Between a Rock and a Hard Place

ETH Breaks above One Key Level, but More Resistance Lies Above

Ahead of ETH's merge on September 15, 2022, ETH has quietly broken above a downward trendline. This may have some significance, and supports the idea that the case for the next few weeks is not necessarily as bearish as everyone may expect.

Note that this is a short-term view only. The longer-term downtrend and bear market in crypto is very much intact and will take far more than two to three weeks of bullish price action.

The Primary Chart above shows the key resistance levels along with the trendline that was recently broken. These levels are labeled on the chart as $1654.31, $1726.04, and $1797.77. Note that $1654.31 as a Fibonacci retracement level also coincides with highs and lows in late August 2022 and early September 2022. This level must be recaptured before any further short-term rally can occur.

The next major resistance at $1726.04 is a Fibonacci .50 retracement of the recent decline from the high on August 14. This level aligns with the highs on August 25 as well.

The final resistance level is at $1797.77 and is the more important .618 retracement of the recent 2-3 week decline.

Supporting the idea that prices may move higher the next couple weeks is the fact that ETH has held support at the .50 retracement of its 3-month summer rally this year. This retracement level equals $1455.78.

Supplementary Chart A: ETH's Fibonacci Retracements for the June-August 2022 Rally

Comparison to BTC's Recent Price Action

BTC has arguably risen above its downward trendline from mid-August 2022 highs. But BTCUSD's breakout looks a lot weaker overall. In general, it is less decisive than ETH's break, probably due to the fact of the upcoming merge for ETH improving its technology. Depending on slight adjustments to BTC's trendline that are within the range of reasonableness, price may still be deemed to be struggling below the trendline or may be barely holding above it. See Supplementary Chart B below.

Supplementary Chart B: BTC's Weaker Action at Downward Trendline

Author's Comment: Thank you for reviewing this post and considering its charts and analysis. The author welcomes comments, discussion and debate (respectfully presented) in the comment section. Shared charts are especially helpful to support any opposing or alternative view. This article is intended to present an unbiased, technical view of the security or tradable risk asset discussed.

DISCLAIMER: This post contains commentary published solely for educational and informational purposes. This post's content (and any content available through links in this post) and its views do not constitute financial advice or an investment recommendation, and they do not account for readers' personal financial circumstances, or their investing or trading objectives, time frame, and risk tolerance. Readers should perform their own due diligence, and consult a qualified financial adviser or other investment / financial professional before entering any trade, investment or other transaction.

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Another supplementary chart to consider shows the upward trendline from the mid-June 2022 low and the upward trendline that is very short-term support since August 28, 2022.

Supplementary Chart C: Two Additional Trendlines to Watch

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ETH's price traded at $1552 since this post was published on September 3, 2022. This post argued that ETH could be strengthening in the short-term (days to weeks) ahead of the merge. This has played out with ETH rising about 80-100 points from $1552, which is a about a 5-6% gain.

ETH has tagged the first level identified in this post: $1654 and has been rejected on the first try. But price continues to hold the upward trendlines (the 3-month and the 2-week upward trendlines) as well as holding support above the downward trendline it broke above a few days ago. As long as price continues to hold and trade above these trendlines, price will like recoup the target at $1654, and if $1654 is held, then $1726, and perhaps even $1800.

Keep in mind that these are short-term technical analyses. The bear market is still in effect, and there is a great deal of risk involved in position trading and buying and holding for a longer-term time frame—until the larger-degree trend structure can change for the positive.

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ETH's price has just broken and held the first resistance level target identified in this post a few days ago— at 1654.

The next target is $1726 *if* 1654 continues to hold.

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ETH tagged 1654 and was rejected on the first attempt. The second attempt succeeded for a while. Eth held this level for about 2.5 4-hour candles (so about 8-10 hours). Then ETH broke back below it, a failed breakout.

Now ETH has also lost that short term upward trendline shown in the update to this post on Sept. 5.

ETH still holds the longer-term up trendline going back to the June lows.

And ETH looks as if it may retest the $1455 Fibonacci level that it previously held. On a retest, the level won't be a strong in all likelihood, but we'll have to wait and see what happens.

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ETH tagged 1654 and was rejected on the first attempt. But the second attempt succeeded for a while. ETH held this level for about 2.5 4-hour candles (so about 8-10 hours). Then ETH broke back below it, so it was a failed breakout above a key level for now.

Now ETH has also lost that short-term upward trendline shown below. The arrows are the places of support that need to hold if ETH has any chance of further strength into its merge event mid-Sept.

ETH still holds the longer-term up trendline going back to the June lows.

And ETH looks as if it may retest the $1455 Fibonacci level that it previously held. On a retest, the level won't be a strong in all likelihood, but we'll have to wait and see what happens.

トレード終了: 利益確定目標に到達

This post never assumed that ETH was in the process of a major trend reversal. My bias remains that ETH is in a bear market. More strength could be seen into mid-September 2022. However, two of the more conservative price resistance levels where price could move higher have been reached: $1655 and $1726. The higher level of $1800 has not.