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What a rally by ETH, especially over the last two sessions, but have the bulls run out of steam? If so, is this a buying opportunity or the start of a deeper sell off?

ETH Run Up Set to Pullback?

ETH/USD 1-Hour Crypto Chart
ETH/USD 1-Hour Crypto Chart

Ethereum has been on a massive bull run over the last week or so, rallying up from swing lows just under the $2,000 handle to topping out just above $3,500 in today’s trade.

The recent bullish sentiment was likely sparked by a slew of positive leaning catalysts, most notably the recent major upgrades to the Ethereum protocol (Ethereum Berlin Fork Launches), and likely on an apparent pick up in institutional demand.  Also, the narrative that Ethereum will likely become bigger than Bitcoin seems to be gaining traction across the internet. 

So, after a 75% rally and much of the bullish news seemingly priced in, where to next for the world’s second biggest crypto asset?

Well, we can see that bears have rejected ETH/USD right at the $3,500 handle, and with bearish divergence signaling a potential reversal ahead, technical short-term traders may join in the selling with profit takers to push the pair lower.

We’re currently watching a retest of the rising ‘lows’ pattern marked on the one hour chart above, and if the market can stabilize here around $3,300, that may be it for the bears. Let’s consider that the daily ATR is around $200 on ETH/USD, so the drop from $3,500 may have already run its course and the bulls may step in.

But given that the we’ve just seen a massive $500 move in just one session, we’ve gotta be open to the possibility of more downside profit taking / short-term speculation, especially considering that stochastic isn’t even showing oversold conditions just yet.

If the market breaks lower from here and drops another $200, then that may be enough to draw in the longer-term players to hold the $3,000 – $3,100 major psychological area. We’ll be watching that area for a retest and hold, as well as oversold signals from stochastic to potentially start building a longer-term position.

Again, the fundamental catalysts and sentiment have been very bullish, and unless we get an exogenous shock to the financial system, or a negative development in the crypto space, the odds are pretty high bulls are waiting around every corner to jump in on pullbacks. So, it makes sense to stay bullish for now until the information changes but be wary that volatility will likely remain high for now.

What do you guys think? Is this dip a buying opportunity on ETH? How high or low do you think the pair can go in the long-term? 

Let me know in the comments below, and as always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.