ETHUSD buyers take profits upon reaching monthly highs

Over the past few weeks, the ETHUSD pair has formed a double bottom pattern on the daily chart, with an upside target above $3,600. However, sellers have since seized the initiative, halting the advance toward this resistance. Last week’s downward momentum faded swiftly due to strong psychological support at $3,000, a level that required a decline of less than 5% to reach. The current reversal from $3,350 is tempting bears, who are anticipating another test of $3,000.

The double bottom formation, combined with a breach of the downtrend from October's highs, improved the technical picture for ETHUSD. However, the 50-day moving average stood in the way of the price’s further ascent to $3,350. Moreover, the emergence of a death cross pattern in late November has muffled Ethereum’s rebound, precluding a full-blown tsunami of growth. In addition, the RSI indicator has approached overbought territory, signaling a potential influx of long positions.

December's rally in ETHUSD is notable for its unusually low leverage. Traders may consider buying Ethereum at around $3,000 as a tactical opportunity, but they are unlikely to play for the long haul. The bulls' panic and immediate profit-taking at the first signs of resistance prevent a sustained rally from developing. This risk aversion is also reflected in open interest for derivatives, which remains near its May lows.

Despite the significant rebound from November's low, trading volumes remained substantially below those observed during the preceding downtrend. The 4-hour ETHUSD chart revealed a bearish engulfing pattern, pointing to a potential exhaustion of buying momentum. Ultimately, quotes may test the previously broken downtrend from top to bottom. Then, it'll be time to figure out the ETH outlook.

The following strategy may come into play:

Sell ETHUSD at the current price. Place Take profit at $3,000 and Stop loss at $3,350.