• Ethereum price triggers a premature reversal before retesting the $1,543 support level.
  • A long squeeze could be possible, which could push ETH to sweep the $1,354 swing low.
  • A daily candlestick close below the $1,284 support level into a resistance level will invalidate the bullish thesis.

Ethereum price shows signs of a premature rally, but if bulls are serious about this move, it could result in a breakout from a significant resistance level and a massive rally.

Ethereum price ready for a pullback

Ethereum price reversed as it retested the $1,730 resistance level, indicating bullish momentum might be exhausted. While it was forecasted in a previous article that ETH would retest the $1,543 support level, the retracement saw a premature reversal after creating a swing low at $1,598.

While this move may appear bullish, it could turn out to be a long squeeze, especially if bulls lack momentum. Hence, if this rally is real, it should either retest the $1,730 hurdle or flip it. Any shortcomings during its journey could prove costly for traders that are positioned long.

Assuming bulls manage to do this, ETH could revisit the $2,000 psychological level.

The threat of a long squeeze will diminish if Ethereum price fills the inefficiency, aka fair value gap at $1,470. In some cases, the market makers might even knock ETH lower to sweep the July 26 swing low at $1,354 before triggering a run-up.

To conclude, investors that went long ETH late are likely to suffer losses more than the ones that opened long positions earlier last week. 

ETH/USD  4-hour chart

ETH/USD  4-hour chart

Regardless of the short-term bullish outlook and the potential for a long squeeze, a non-stop sell-off that flips the $1,284 support level into a resistance level will invalidate the thesis explained above.

In such a case, a revisit to the range’s midpoint at $1,080 seems plausible

 

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