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After a strong breakout from the consolidation range, Ethereum rose above $4,200, creating a possibility of entering the third wave of its price cycle, which is frequently the most aggressive and prolonged stage in Elliott Wave Theory. If this scenario turns into reality, ETH may be aiming for a run toward $5,600, which is in line with Fibonacci projections and typical wave extension targets.
Technically speaking, the rally in ETH has been bolstered by a clear break above the psychological $4,000 barrier and a robust volume spike that is among the highest daily trading spikes in months. While the RSI has moved into the overbought zone above 70, the 20-day EMA (~$3,647) remains a dependable dynamic support.
Though it doesn't necessarily limit upside potential during a strong wave three rally, this does point to short-term overheating. Investors and traders should keep an eye on three important levels. The area that ETH is presently testing is the immediate resistance at $4,300-$4,350. The $4,600-$4,800 range could be confirmed by a daily close above.
Support at $4,000: A retest and a successful defense here would demonstrate that the previous resistance has turned into support, bolstering the bull case. The third wave is stalling if it loses the major support level at $3,650, which could cause a deeper retracement toward the 50-day EMA close to $3,190.
The third wave forecast toward $5,600 is still conceivable if ETH keeps up its momentum and stays clear of significant declines. Traders should be mindful though that wave three rallies frequently draw late entrants, resulting in brief but severe corrections before the market continues to rise.
Dan Burgin
Vladislav Sopov
U.Today Editorial Team