Why Ethereum is Selling-Off After the Merge?
Ethereum (ETH) has lost over 26% of its value post-merge upgrade in what appears to be a "buy the news, sell the fact" event. There are a few technical reasons for the current downturn in ETH's price that we're going to explore below.
But before we dive deep into the technical reasons, it's important to remember that the merge will play a more prominent role on the ETH price in the long term, while the technical forces are driving the price in the short term.
ETH Bear Flag
We have a post-merge technical pattern in the form of a bearish flag formation. The initial sell-off right after the merge formed the flagpole. The tight consolidation between the $1,400 resistance level and the $1,221 support level that followed created the flag.
The ETH bearish flag pattern is only confirmed once the bottom of the flag is broken. It's critical to wait for confirmation in this case to confirm the chart pattern.
The potential measured move target of the bearish flag is near $1,000.
What is a Bear Flag?
The Bear Flag is a bearish continuation pattern that can form after a prolonged downtrend. It looks like a flag with a mast on either side, and it occurs when the price consolidates within a tight range before breaking out to the downside.
The Bear Flag typically forms during a period of consolidation after a sharp decline, and it can be used to confirm that the downtrend is still intact. A break below the flag support level can be used to trigger short sell orders.
ETH's ABC Corrective Pattern
Another clear pattern that emerged on ETH's daily chart is the formation of a potential ABC pattern. The first leg down ended at the August 28 low, and the pullback in wave B ended a few days before the merge event.
Currently, wave C is in progress as the breakout below the August 28 low opened the door for a possible retest of the $1,000 support level. The ABC correction wave will usually target the area between 1 and 1.272 Fibonacci extension levels of wave A measured against the high of wave B.
We only had one brief daily close below this level on June 18, which was quickly reversed. Moving forward, we can expect this level to be protected by the bulls.
