Ethereum (ETH) bears are losing momentum as the bulls step in to push for a reversal. This week, the number of shorts reached an all time high. The last time this happened, we saw ETHUSDShorts enter a downtrend. Similarly, when it reached an all time low around August last year, we saw it enter an uptrend and the price of Ethereum (ETH) started to fall soon afterwards from its all time high. Markets stage reversals at points when one of the two sides gets too comfortable. The yearlong bear market has made the bears quite confident. In fact, over the past few weeks, we have seen unprecedented risk taking on the sell side which is a testament to the fact that the bears have become too confident and complacent.
The chart for ETHUSDShorts also shows that the RSI has run into a historical resistance and has already taken a turn for the downside. It would not be surprising to see the number of shorts drop drastically from current levels. That being said, it is too early to say that this is the end of the bear market. We have been long overdue for a correction to the upside and we are going to get it. However, this does not mean that the price may not drop again to reach a new around early 2019. The probability of a reversal from current levels is very high and the price of Ethereum (ETH) is expected to rise aggressively in the weeks to come. A strong reversal from current levels will most likely be fueled by a short squeeze which will see the bearish resolve get crushed short term.
Ethereum (ETH) is forming what appears to be an inverse head and shoulders on the 4H chart for ETH/USD. This pattern is the only shot Ethereum (ETH) has to stage a comeback. If this fails to come to fruition, we may see the price drop further without even correcting to the upside first. The RSI on the 4H timeframe is not in an ideal position for an aggressive rise towards $125. However, we believe that this rise will take its time and is expected to complete after mid December. After this rise, we will see the price fall again to complete the right shoulder of the IH&S formation. Completion of the right shoulder and thus the entire IH&S is what will propel Ethereum (ETH) towards a retest of its previous market structure that is now broken.
This is a move that we have seen in the past. Both Bitcoin (BTC) and Ethereum (ETH) are expected to rise towards their previous market structures for a retest. They will most likely be rejected and the price will fall again. It is pertinent to note here that breaking of market structure is of significant consequence in chart analysis. Now that Ethereum (ETH) has broken its market structure, it is unlikely to break above it anytime soon because that structure will now act as a resistance. That being said, ETH/USD is due for a recovery which we will see in the weeks to come.