A compelling bullish pattern on cryptocurrency Ethereum combined with an accidental technical gremlin could present investors with a buying opportunity.
Ethereum (ETH/USD) has formed a very large triangle pattern on the medium-term weekly chart and studies suggest this development might advocate for a sharp breakout higher on the horizon.
The pattern has been noted by financial analyst Aurelija Augulyte who suggests the price represents a "calm before the storm."
According to technical lore triangles can breakout in either direction but they are more likely to breakout in the direction of the trend prior to their formation.
In the case of Ethereum, the prior trend was up so the triangle will probably break higher.
To be classified as complete, triangles are required to have a minimum of five composite waves, which the triangle on Ethereum now has, as can be seen on the chart below which shows the composite waves labeled A-E.
A breakout higher would be confirmed by a move above the top of wave B and 350 ETH/USD.
Such a move would be expected to move a distance equal to the height of the triangle at its tallest point extrapolated higher from the point of the break, which yields a final target of 526.
A more conservative target is at the level which is 61.8% of the height of the triangle extrapolated higher, which generates a target of 452.
Bullish 'Hard Fork'
Ethereum, the number-two cryptocurrency after Bitcoin, hit the headlines recently after an accidental 'hack' led to a single investor becoming the sole owner of 150 million and 300 million Ethereum.
The currency wallets cannot be reclaimed and the only solution, say experts, is to 'split the crypto's blockchain' essentially cloning another version of Ether in the process.
Such a 'split' would be expected to lead to a rise in Ethereum as buyers might buy the core crypto in the hope of being compensated for the original hack which would see them possibly collecting some of the new currency as a sort of 'dividend'.
"A hard fork, where another version of a cryptocurrency is cryptographically minted, can provide incentives for investors to buy the core asset in the hopes of collecting the newer version as a sort of dividend," said Market Watch Market's Editor Mark DeCambre
This may explain why ETH/USD rose from 291 to 300 on Wednesday and could support the bullish forecast generated by the triangle pattern.