Ethereum has formed lower highs and lower lows to trade inside a descending channel on the daily time frame. Price is currently testing support and could be due for a pullback to the top from here.
Price is already testing the 38.2% Fibonacci retracement level around $155, and holding as resistance could push price back to the swing low or the channel bottom. The 100 SMA is below the longer-term 200 SMA to confirm that the path of least resistance is to the downside or that the selloff is more likely to pick up than to reverse. The gap between the indicators is also widening to signal strengthening selling pressure.
However, RSI is pulling up after reaching the oversold region, indicating that bullish pressure could still return. Stochastic is also starting to head north, so ethereum might follow suit while buyers have the upper hand. A larger correction could last until the channel top around $170, which is just below the 100 SMA dynamic inflection point.
Ethereum tumbled like most of its altcoin peers when news broke out that China could step up its crackdown on cryptocurrencies in the country. Recall that prices enjoyed a bit of a boost on earlier reports that the government is opening up to the idea of tapping into blockchain technology, so the gains were erased as the sentiment shifted.
Also, profit-taking leading up to the Thanksgiving holidays appears to be taking place, leading to even more declines for cryptocurrencies. Unless a positive development comes up before the end of the year, this could be the case across the board, likely keeping the downtrend intact for ethereum.
Risk appetite has also improved in general financial markets, drawing traders back to traditional holdings like stocks and commodities and away from alternative assets like cryptocurrencies that tend to draw interest in times of crisis.
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