Ethereum RSI Breakout Suggests Massive Bullish Momentum, But There is One Issue

Ethereum RSI Breakout Suggests Massive Bullish Momentum, But There is One Issue
Ethereum RSI Breakout Suggests Massive Bullish Momentum, But There is One Issue

Key Ethereum Takeaways

  • Ethereum daily Relative Strength Indicator (RSI) broke above its medium-term downward slope resistance.
  • The move matched momentum with Ethereum’s spot price that reached its mid-March high.
  • However, a brewing bearish divergence could play a spoiler.

Yerevan (CoinChapter.com) — Ethereum prices reclaimed their mid-March high following a strong move upward in the previous 24 hours.

The second-largest cryptocurrency (by market cap) touched $1,966 during the pre-market Thursday session in London. Traders raised their ETH/USD bids amid capital inflows into the wider altcoin market after Bitcoin showed signed of stabilizing near $59,000. ETH/BTC rose roughly 6 percent on a 24-hour adjusted timeframe (data from Messari).

RSI Breakout

The relative strength indicator on Ethereum’s daily chart broke bullish on a medium-term descending trendline resistance.

In retrospect, the Relative Strength Indicator, or RSI, enables technical chartists to measure an asset’s performance by comparing the strength between its up days versus down days. The outcome comes in the form of reading between 0 and 100, with signals below 30 alerting that the asset stands oversold and signals above 70 reflecting that the asset is overbought. A reading between 30 and 70 means neutral.

As of this press time, the ETH/USD’s one-day RSI reading is 63.5, confirming the pair’s bias to test 70 and levels above it. Meanwhile, the Ethereum price expects to rise alongside the RSI, with the next primary upside target sitting near $2,000.

Ethereum price and RSI expect to rise in tandem. Source: ETHUSD on TradingView.com
Ethereum price and RSI expect to rise in tandem. Source: ETHUSD on TradingView.com

The upside outlook converges well with a prevailing Bullish Triangle breakout taking place on Ethereum’s daily charts. In general, a sharp upside move outside the consolidation channel expects to push the asset by as much as the height of its previous uptrend. If one takes that into consideration, Ethereum looks poised to hit at least $3,000 in the coming daily sessions.

One Scary Outlook

Ethereum offers all the promises to become a bullish token, primarily as its blockchain inches closer to become a more efficient and less costly public ledger with a major upgrade to proof-of-stake later this year. But technically, the cryptocurrency comes with a major red flag: bearish divergence.

Ethereum bearish divergence outlook. Source: ETHUSD on TradingView.com
Ethereum bearish divergence outlook. Source: ETHUSD on TradingView.com

A bearish divergence occurs when the RSI returns an overbought reading followed by a lower high but the asset’s price forms corresponding higher highs. That indicates a false upside momentum, which risks premature exhaustion, leading to considerable declines in the prices.

Should Ethereum correct lower, its next downside target would be the 50-day moving average (the blue wave in the chart above).

Photo by Tim Mossholder on Unsplash.

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