Ethereum recently surpassed the important resistance zone between $3,900 and $4,100, closing a three-day candle above this level. This move is considered positive in the overall trend, supporting continued upward momentum. However, an analyst has warned that the market may witness a short-term correction before moving higher.
Support areas to pay attention to
The range of $3,900 to $4,100 is currently an important support zone to watch. If Ethereum holds above this area, a breakout could still occur. However, if the price closes below $3,900, the breakout could be invalidated, leaving buyers who participated at higher prices stuck.
Warning signs from Bitcoin dominance
Bitcoin dominance index, a measure of the percentage of the cryptocurrency market made up of Bitcoin, is maintaining support at around 60.5%. If the dominance index rises again, it could put pressure on altcoins, including Ethereum. Technical signals also suggest the possibility of bullish divergence in the Bitcoin dominance index, which could indicate a short-term weakening of altcoins.
Bearish divergence on the Ethereum chart
On the daily chart of Ethereum, a bearish divergence may be forming, where the price is making higher highs but the RSI (Relative Strength Index) is making lower highs. Similar patterns in the past have led to minor pullbacks lasting a few days.
A bearish divergence is also emerging on the ETH/BTC chart, indicating that Ethereum may underperform Bitcoin in the coming week. If Bitcoin struggles at current resistance levels, Ethereum may see an even stronger decline.
Short-term outlook
If the bearish divergence is confirmed, a short-term pullback could bring Ethereum back to retest the new support level around $3,900 to $4,100. While this would be a setback in the short term, it could also reinforce the larger bullish structure if the support level holds.