Ethereum's recent price action on the 4-hour chart has led to the formation of a classic Head and Shoulders pattern that opens up the possibility for a deeper correction. After a relatively stable period around the $2,500 level, Ethereum broke below the neckline support as last week was coming to an end. This raises the question of whether Ethereum's price will continue to decline or if buyers still have a chance to regain upward momentum in the new week.
The Head & Shoulders pattern is confirmed after breaking below $2,480.
The Head and Shoulders model, one of the most recognizable reversal patterns in technical analysis, is now clearly visible on the 4-hour candlestick chart of Ethereum. This chart and technical outlook were first shared on the TradingView platform by cryptocurrency analyst MelikaTrader94. The structure includes a left shoulder, a prominent head peaking above $2,700, and a right shoulder peaking near $2,650. The neckline, drawn around $2,480, was broken during Ethereum's recent pullback to $2,380. In turn, this has shifted the short-term outlook to a bearish one.
After the breakdown, Ethereum has attempted to reclaim lost ground and is currently retesting the neckline area. This retest around the $2,500 level is crucial, as failing to push back significantly above this level could potentially confirm the bearish setup and cause Ethereum's price to reverse down towards the next support area.
According to the outlook from analyst MelikaTrader94, the price target from the breakdown of this Head and Shoulders pattern before any significant recovery can occur lies in the range of $2,200 to $2,250.
Bulls must reclaim $2,650 to invalidate the bearish setup.
The convergence of supporting factors around the $2,200 area as a potential landing zone. This level not only aligns with the measured move of the Head and Shoulders pattern but also corresponds with the order block on May 9 during Ethereum's bullish move above $2,000 at that time. This further enhances the technical relevance of the $2,200 to $2,250 range as a support area.
However, the situation is not entirely pessimistic yet. The path ahead is clear but narrow for Ethereum bulls. The first step to invalidate the bearish setup is to decisively reclaim the neckline around the $2,500 level. Additionally, breaking back above the right shoulder around $2,650 would invalidate the Head and Shoulders pattern, and another pattern is likely to emerge.
A successful bullish recovery would not only invalidate the bearish pattern but could also restore sentiment for a retest of the $2,700 to $2,800 range, corresponding with the peak of the head in the newly formed pattern. Until such a recovery occurs, Ethereum's price could quickly reverse down at any time.