After Rally, Ethereum Looks Primed for Profit-Taking

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After Rally, Ethereum Looks Primed for Profit-Taking
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key takeaways

Ethereum is currently showing a sell signal on the daily chart. A bearish pattern emerged after ETH gained 40%. A surge in profit-taking could push ETH above the $1,300 support.

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Ethereum may be on the verge of a sharp pullback after gaining more than 400 points in market cap over the past week. Nonetheless, on-chain data shows that ETH is at a solid support level.

Ethereum flashes sell signal

Ethereum appears to be trading in overbought territory, which could lead to a sharp spike in profit-taking.

The second-ranked cryptocurrency has surged nearly 40% over the past week. It rebounded from a low of $1,180 on July 15 to a high of $1,650 today. However, ETH’s bullish price action appears to be fading as the technicals show signs of weakness.

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The Tom DeMark (TD) Sequential indicator has a sell signal on Ethereum’s daily chart. The bearish pattern developed into a green nine candlestick. Increased selling pressure can validate a bearish outlook and lead to a one to four daily candlestick correction.

ETH/USD daily chart (Source: TradingView)

Trading history shows that Ethereum formed a massive demand wall at $1,550. More than 586,000 addresses previously purchased nearly 5.1 million ETH around this price level. Therefore, if investors take profits, the bearish thesis could be validated, which could send ETH below the $1,550 support.

Failure to hold above this important demand area could trigger a 15% correction towards the 50-day moving average around $1,300.

Ethereum transaction history
Ethereum moves money in and out around price (Source: IntoTheBlock)

Ethereum may need a firm close above $1,650 to invalidate the bearish thesis. A break above this resistance could help the price surge towards the next important hurdle at $1,800, with 1.14 million addresses currently holding over 800,000 ETH.

Disclosure: At the time of writing, the author of this feature owns BTC and ETH.

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