coindesk.com
Ether (ETH) has topped a key technical level for the first time in three months, leaving the market-leader bitcoin (BTC) behind.
However, one analyst tracking price chart patterns cautions against expecting rapid ether price rallies.
Ether moved above the 50-day simple moving average (SMA) on Monday, hitting a one-month high above $1,500. The cryptocurrency traded at $1,525 at press time, with the 50-day SMA at $1,327. Bitcoin remained below its 50-day SMA at $23,000.
While chart-based traders and analysts typically read crossovers above the 50-day SMA as a sign of a positive shift in the momentum, ether's latest breakout may be different, according to Katie Stockton, a chartered market technician and founder and managing partner of Fairlead Strategies.
"Ether has cleared its 50-day [S]MA, improving sentiment behind altcoins [alternative cryptocurrencies], but the bounce may be fleeting with short-term overbought conditions having returned," Stockton wrote in a client note late Monday. "The downtrend remains intact, with prices below the daily [Ichimoku] cloud model."
Ichimoku cloud, created by Japanese journalist Goichi Hosoda in the late 1960s, comprises two lines – the leading span A and the leading span B. Both lines are plotted 26 days ahead of the last candle to indicate future support or resistance. Crossovers above or below the cloud are widely taken to represent early signs of a bullish or bearish trend change.
As of writing, ether traded within the Ichimoku cloud identified by the area between the leading span A and the leading span B. Any move above the leading span B would be needed to confirm the cloud breakout.
"Ether needs more significant improvement in intermediate-term momentum to convince us a lasting turnaround is underway," Stockton noted, citing the lack of major price support between $1,000, the psychological level, and the Sept. 2020 high of $490 as a risk to the cryptocurrency.
In other words, there is plenty of downside possible should ether fall below $1,000 – more so since long-term indicators remain bearish.
"From a long-term perspective, a bear market cycle has a hold with negative momentum according to the monthly MACD and stochastics."
The weekly chart "moving average convergence-divergence" (MACD) histogram printed negative values as of writing, indicating a persistent bearish bias. The MACD is an indicator used to gauge trend strength and identify trend changes. MACD's crossover below zero implies a bullish-to-bearish trend change and vice versa.
Stochastics, a popular indicator for generating overbought and oversold signals, signaled oversold conditions with a below-20 print. However, oversold does not imply a trend reversal higher and indicators can stay oversold longer than dip buyers can stay solvent.
Despite the latest bounce, ether was nursing a 58% year-to-date loss, compared to bitcoin's 51%.