The path of least resistance for ether appears to be to the downside as a widely tracked indicator rolls over in favor of the bears.
“The weekly MACD indicator has flashed a sell signal for the first time since going positive in October 2020, which suggests the correction may resume beyond the near-term,” Katie Stockton, founder and managing partner of Fairlead Strategies, said in a weekly research note published Monday.
Moving average convergence divergence (MACD) is a technical indicator used to gauge trend changes and strength. Chart analysts consider a move below zero to signify a bearish shift in momentum and a move into positive territory as a bullish reversal signal.
Not only has the MACD dropped below zero, it is also now at the most negative since September 2018, implying the strongest bearish bias in nearly three years.
The weekly MACD for bitcoin turned bearish in the second half of April, signaling scope for a sell-off. Back then, the biggest cryptocurrency by market value was trading above $50,000. Prices fell by 35% in May, hitting lows near $30,000.
Ether, the native token of the Ethereum blockchain, was trading near $2,500 at press time, representing a 3% drop on the day and a 9% decline on a 24-hour basis, according to CoinDesk 20 data.
The latest drop follows repeated bull failures at the 50-day simple moving average (SMA) hurdle in the past two weeks. The 50-day SMA currently resides just above $2,900.
“Intermediate-term momentum has deteriorated, supporting a lower high versus the May peak near $4,380,” Stockton said, adding that immediate support is located at $2,038, under which the focus would shift to the 61.8% Fibonacci retracement near $1,730.
“We would not rule out a retest of the 61.8% retracement level,” Stockton wrote. “As long as the 61.8% retracement level is intact, so is the long-term uptrend behind ether, which remains supported by the monthly MACD.”