Ethereum (ETH) Presents The Ideal Setup For A Massive Bear Trap

Ethereum (ETH) is about to run into a historical trend line resistance which will result in a short term retracement. This short term pullback is likely to drag ETH/USD slightly below the 21 Day EMA which is going to result in a major sentiment shift and the bears are going to get more confident again. There is little to no doubt that we are ultimately going to get a retest of $70 before an actual trend reversal. The bulls and bears both are aware of this. However, it all comes down to timing. There is a strong probability that the bears are going to take this as a sign of weakness and the number of shorts is going to rise again which would result in a mini short squeeze.

The actual short squeeze that we have been anticipating for a long time now is not expected anytime soon. It is going to happen around $70 when the bearish momentum is at its peak. It could be this month or sometime in the next year, but it is going to happen. Before a trend reversal, there always is a tug of war between the bulls and the bears. Both sides do their best to push the price in opposite directions. As Ulysses S. Grant says, “In every battle there comes a time when both sides consider themselves beaten. Then he, who continues the fight, wins.” The same thing happens every time during a trend reversal. So far, we have not seen the bulls fight for anything. In fact, during the last few rallies, the number of longs has fallen more than the number of shorts.

Ethereum (ETH) seems to have bottomed out against Bitcoin (BTC) but it has not yet tested the December 2017 lows. The daily chart for ETH/BTC shows that the price has now broken above the giant falling wedge but it could fall along the top of this falling wedge to retest the December 2017 low. At the moment, ETH/BTC is resting above the 21 Day EMA support but soon as it breaks below it, we would see the price fall to the December 2017 low in no time. A bounce from that level will be quick and that is when we will actually see the formal beginning of a new trend. RSI for ETH/BTC also points to a short term pullback.

The interesting part here is that both ETH/USD and ETH/BTC present ideal setups for a massive bear trap. If we look at the above daily chart for ETH/BTC, we can see that the RSI is setting the ground for a head and shoulders formation. Seeing as how the bears are quite fond of head and shoulders in this market, if we see a follow through and a subsequent increase in the number of shorts, it would be the ideal setup for a massive short squeeze that would completely shatter the bearish resolve and set the ground for the actual beginning of a new trend.