Ethereum has been able to sustain its rally so far this May, breaking out of a consolidation phase and surging to new local highs just slightly above $2,750.
After such a strong move upward, the second-largest cryptocurrency is showing signs of a potential pullback, though the overall structure remains decisively bullish.
Ethereum Correction Levels
The Fibonacci retracement levels drawn from the recent uptrend provide critical areas where buyers may step in. The 38.2% retracement level sits at $2,379.88, the 50% level at $2,263.79, and the 61.8% level at $2,147.70. These areas will likely act as support zones should Ethereum continue to pull back from current levels.
Currently trading at $2,584.66, Ethereum is hovering above the first major Fibonacci support, suggesting that buyers remain in control despite the recent hesitation. The most immediate support comes from the steep ascending trendline that has guided the recent rally, which intersects near the $2,400 level.
Should Ethereum break below the ascending trend line, the 100% Fibonacci level at $1,771.89 represents a major support area, though price would need to break multiple support zones to reach this level.
Ethereum Technical Analysis
The 100 SMA (blue line) is positioned above the 200 SMA (red line), confirming that the path of least resistance is to the upside. Both moving averages are sloping upward, further reinforcing the bullish bias in the market. These dynamic support levels are currently situated around the $1,800-$1,900 range, providing a substantial safety net below current price action.
Looking at momentum indicators, the MACD (middle panel) shows positive momentum with the histogram bars in green territory, though they appear to be diminishing in height, suggesting a potential slowdown in bullish momentum. The signal lines remain above the zero line, which is indicative of an ongoing bullish trend.
The stochastic oscillator (bottom panel) is showing a bearish divergence with price, as it has started to decline from the overbought territory while forming a lower high against Ethereum’s higher price high. This divergence often precedes a correction or consolidation phase. There’s also a visible bearish trendline forming on the stochastic oscillator, further supporting the case for a potential pullback.
Despite these warning signs in momentum indicators, Ethereum’s price structure remains firmly bullish as long as it stays above the rising trend line. The cryptocurrency has shown remarkable strength during this rally, outpacing many of its peers in the digital asset space.
Market participants should also watch for potential reversal candlesticks at the current level, which could signal a deeper correction toward the Fibonacci support levels. Alternatively, a decisive break above the recent high of $2,755.70 would invalidate the bearish divergence and potentially trigger another leg up in the rally.
Ethereum continues to benefit from growing institutional interest and the anticipated implementation of scaling solutions, which could drive further demand in the medium to long term. However, in the immediate timeframe, traders should be cautious of the potential for a healthy retracement spurred by profit-taking after such a steep climb.
