Ethereum’s native cryptocurrency, Ether (ETH), rebounded sharply on Thursday after Elon Musk disclosed for the first time that his private rocket firm, SpaceX, holds Bitcoin (BTC) and that Tesla would probably resume the Bitcoin payments option for its electric cars.
The BTC/USD exchange rate was below $30,000 but bounced by more than 5% after the big reveal, touching an intraday high of $32,895. Ether, which tends to move in lockstep with Bitcoin, surged likewise.
It reclaimed $2,000 on Wednesday, rising by as much as 18.20% from its week-to-date low of $1,720.
Lukas Enzersdorfer-Konrad, chief product officer of financial services company Bitpanda, told Cointelegraph in an email statement that Ethereum would continue tailing Bitcoin in the coming sessions.
“As soon as the ‘big brother’ finds its support level,” he added, “Ethereum will most likely follow suit.”
Classic pattern sets $2,500 target for ET
The latest bounce in the Ether market also originated from a support level that had earlier capped Ether’s downside attempts.
Pseudonymous independent market analyst Rekt Capital flashed a so-called “orange area” on a weekly ETH/USD chart, illustrating three bearish wicks and their ability to shield the pair from falling lower.
“ETH has rallied +16% since rebounding from the orange area,” the analyst explained, coupling the price floor with a support trendline that apprehensively constituted a Falling Wedge.
In detail, Falling Wedges are bullish reversal patterns that start wide at the top but start contracting as the prices move lower, forming a sequence of lower highs and lower lows. A bullish confirmation comes when the price breaks above the Wedge’s upper trendline with a spike in volumes.
In doing so, bulls place their upside profit target as high as the maximum wedge height.
Ether prices almost check all the boxes when it comes to trading inside a Falling Wedge pattern. Rekt Capital highlighted the same in a chart he published Thursday.
“As long as ETH holds the bottom of the structure as support until the end of the week, [it] will confirm a return to the structure after briefly losing it earlier this week,” added Rekt Capital.
The maximum distance between the Wedge’s upper and lower trendline is roughly $850. Therefore, according to the classic technical setup, a breakout above the upper trendline could send the prices to at least $2,500.
Nonetheless, the prices still risk falling sharply below $2,000, based on a short-term technical setup, as shown in the chart below.
The daily Ether chart shows the price could fluctuate between $1,850 and $2,080 before the potential bullish breakout, noted Rekt Capital.
Charles Kirkpatrick and Julie Dahlquist’s book Technical Analysis: The Complete Resource for Financial Market Technicians notes that Falling Wedges have a failure rate of just 8%–11%. Moreover, the possibility of a bearish breakout has a higher failure rate of 15%–24%.
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