Ethereum (CRYPTO: ETH) was soaring up over 10% at one point during Saturday’s 24-hour trading session, showing strength compared to Bitcoin (CRYPTO: BTC), which was up about 3%.
The sharp increase in Ethereum’s price may have been caused by a double bottom pattern the crypto printed recently.
A double bottom pattern is a reversal indicator that shows a stock has dropped to a key support level, rebounded, back tested the level as support and is likely to rebound again. It is possible the stock may retest the level as support again, creating a triple bottom or even quadruple bottom pattern.
The formation is always identified after a security has dropped in price and is at the bottom of a downtrend, whereas a bearish double top pattern is always found in an uptrend. A spike in volume confirms the double bottom pattern was recognized, and subsequent increasing volume may indicate the stock will reverse into an uptrend.
- Aggressive bullish traders may choose to take a position when the stock’s volume spikes after the second retest of the support level. Conservative bullish traders may wait to take a position when the stock’s share price has surpassed the level of the initial rebound (the high before the second bounce from the support level).
- Bearish traders may choose to open a short position if the stock rejects at the level of the first rebound, or if the stock falls beneath the key support level where the double bottom pattern was created.
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The Ethereum Chart: Ethereum printed a double bottom pattern on June 30 and July 13 just below the $1,000 mark, and began to react bullishly to the pattern on July 14. The bullish price action in the stock market on Friday likely increased trader and investor confidence that crypto could see continuation into next week.
- The increase was taking place on high volume, which indicates there’s currently a high degree of trader and investor interest. At press time, Ethereum’s volume was measuring in at more than 200,000 on Coinbase compared to the 10-day average of about 285,000, with still many hours to go before the 24-hour trading session comes to an end.
- Bullish traders will want to see Ethereum eventually fall lower in order to print a higher low, which would confirm a new uptrend is beginning. The crypto may print an inside bar during Sunday’s trading session to consolidate Saturday’s bullish move higher, and an upward break from the pattern would give traders who aren’t already in a position a solid entry point.
- Ethereum is trading above the eight-day and 21-day exponential moving averages (EMAs) and the eight-day EMA is beginning to cross above the 21-day, which is bullish. Over the coming days, traders will want to see Ethereum regain the 50-day simple moving average as support, which could indicate longer-term sentiment has turned bullish.
- Ethereum has resistance above at $1,421.80 and $1,717,41 and support below at $1,245 and $1,081.
See Also: A Look At The Dogecoin Chart As The Good Boi Heads Into The Weekend
