Sept 22 (Reuters) - Ether spent the last month moving sideways as it caught its breath following a stunning rally of more than 30% in late August, but technical analysis suggests the cryptocurrency is ready to make its next move higher.
The fresh momentum comes as ether rallies beyond the confines of a formation known as a “bull flag” that had evolved over recent weeks.
A bull flag is considered a continuation pattern. It usually occurs when a sharp surge higher — which forms the flag “pole” — is followed by a period of narrow range trade. This phase — known as consolidation — is necessary as previous buyers take profits and new entrants prepare for the next move. This makes up the “flag” portion of the formation.
Usually, a bull flag ends when prices rally above the top of the flag, which occurred on Monday, when ether surpassed the September 11 high, which is at $2,661.52, according to data supplied by LSEG.
That should propel ether toward a target of $3,050, based on the size of the bull flag formation. Along the way, it could stop for another period of consolidation in the $2,775 to $2,825 range, which is the site of previous daily lows and highs.
Adding to the optimism, ether rose on Friday above the 10-day moving average — a chart constraint closely watched by technical analysts. Ether has also secured a foothold above a trendline drawn from its February high. Technical analysts use trendlines, which connect previous lows or highs, to determine where price moves can pick up momentum.
These supporting developments lend confidence to the current upswing and increase the chances that it could extend beyond the initial target of $3,050 and possibly up to the $3,395 to $3,445 area, which coincides with the January and December highs.
However, if ether were to fall below the $2,560/65 area, bulls would grow nervous, while a move beneath $2,350/60 would probably spell the end of the rally.
What the chart shows:
Ether breaks out of bull flag formation at $2,661.52
Initial target: $3,050; extended target: $3,395-$3,445
Key support levels: $2,560-$2,565 and $2,350-$2,360
(Mapping the Market is a daily column written by Reuters journalists. The commentary is based on a technical analysis of financial charts, which helps assess the likelihood of future price moves but does not guarantee the outcome. The column does not constitute investment advice or trading recommendations. )
Christopher Romano is a Reuters market analyst. The views expressed are his own; Editing by Burton Frierson and Nia Williams
