An analyst explained how a trend forming in the Ethereum 3-day chart could signal that a decline towards $1,700 could be ahead.
Ethereum recently formed a TD sequential sell pattern
In a new job on X, analyst Ali talked about a sell signal that took shape in the ETH 3-day chart. The relevant technical indicator here is the “Tom Demark (TD) Sequential”, which is used to spot reversals in the price of any asset.
The metric is composed of two phases; a configuration phase and a countdown phase. In the first, candles of the same polarity are counted to nine following a price reversal. Once the ninth candle is reached, the indicator signals a likely high or low for the asset (depending on whether the trend so far was up or down).
Once the setup is complete, the 13 candle countdown phase begins. At the end of these 13 candles, a potential reversal takes place again for the asset.
Ethereum has seen a strong rise recently, but according to the analyst, the cryptocurrency has now completed the indicator setup phase, implying that the asset could be heading into a downtrend period.
The chart below shows this trend in the coin’s price over 3 days:
Looks like the indicator is giving a sell signal at the moment | Source: @ali_charts on X
In the same chart, the analyst drew an ascending triangle pattern for Ethereum. “Ascending triangles” are made up of two lines: one parallel to the x-axis drawn through the price’s highs, while the other is made by connecting the highest lows.
In general, the price seems resistance at the upper line and support at the lower line. A break of either of these lines suggests a continuation of the trend: bullish in the case of an increase above the first, bearish in the case of the second.
From the chart, it is visible that Ethereum recently retested the $2,000 to $2,150 zone, which is the resistance level of this ascending triangle.
It is therefore interesting to note that the sequential setup phase of ETH TD ended just as the coin encountered this line from which it had been rejected in the past.
“A pullback from this resistance level could lead to a decline towards the hypotenuse of the triangle at $1,700, opening the way for a potential continuation of the uptrend,” explains Ali.
The analyst also notes, however, that the $2,150 level could be one to watch, because if the asset could see a 3-day candlestick close above this level in the coming days, the bearish outlook could be negated .
Ethereum recently surpassed $2,100, but the coin has seen some pullback over the past day, a potential sign that the sell signal may already be in effect.
ETH has registered a drop during the past day | Source: ETHUSD on TradingView
Featured image from DrawKit Illustrations on Unsplash.com, graphics from TradingView.com