Ethereum’s native token Ether (ETH) has fallen back 40% against Bitcoin (BTC) after bottoming out locally at 0.049 on June 13. Now the ETH/BTC pair is at two-month highs and could extend the rally in the coming weeks, according to a classic technical pattern.
ETH paints cup and handle pattern
Specifically, ETH/BTC has formed a “cup and handle” on its lower time frame charts since July 18th.
A cup and handle setup usually appears when price drops and then reverses in what appears to be a U-shaped breakout, which looks like a “cup”. Meanwhile, the recovery leads to a pullback move, where price trends fall inside a descending channel called the “handle”[ads1];.
The pattern resolves after the price rise to an approximate size of the previous decline. The ETH/BTC chart below illustrates a similar bullish technical setup.
Notably, the pair is now trading lower within the handle area, but may pursue a recovery towards the neck resistance near 0.071 BTC. Afterwards, a decisive cup and handle breakout above the neck level could take ETH/BTC to 0.072, up 12.75% from today’s price.
The success rate of the cup and handle pattern in hitting the profit target is 61%, according to veteran investor Tom Bulkowski.
The pooling factor
The bullish setup for ETH/BTC also takes cues from Ethereum’s network transition from proof-of-work (PoW) to proof-of-stake (PoS) potentially via “the Merge” planned for mid-September.
Related: Will Ethereum Merge hopium continue or is it a bull trap?
Meanwhile, market analyst Michaël van de Poppe says that Ether could see more upside against Bitcoin due to the Merge hype as momentum builds in the coming weeks.
Basically a few levels on $ETH.
Resistance at 0.0725 $BTC.
Overall, expect more momentum towards the merger in September. pic.twitter.com/QpmkyTwjyb
— Michaël van de Poppe (@CryptoMichNL) 23 July 2022
Van de Poppe expects ETH/BTC to test 0.072, the cup-and-trade profit target, as temporary resistance while holding either 0.0645 or 0.057 level as support.
Conversely, the range of risks for Ethereum with the Merge update include potential technical issues, delays, or even a contentious hard fork. For example, a bug had split the Ethereum chain during a network upgrade in 2020.
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