Ethereum’s layer-2 blockchain Arbitrum is facing a pivotal moment: will it break out of the descending triangle (in the 4-hour chart) or will it see an even deeper correction in the coming days. As NewsBTC reported, Arbitrum’s on-chain data remains extremely strong and could signal an end to the downtrend.
However, an important question will also be whether investors regain confidence in altcoins (except PEPE). Bitcoin dominance has been on the rise again against altcoins since May 1, approaching the local high of 49%. Once confidence returns, ARB could benefit greatly. But if not, another plunge could be next.
Arbitrum Price Analysis
Arbitrum’s price corrected sharply in the last two trading weeks after reaching an all-time high of $1.81 on April 23. It was only in the area of the old breakout zone at $1.30 that the ARB price found a floor after a 30% price decline.
Now, this price level is also the frontier in the 4 hours, which bulls should defend at all costs. It is the support line in a descending triangle pattern that has been forming over the past two weeks. The descending triangle is a bearish pattern that anticipates a breakdown to the downside.
In order to invalidate the chart pattern, the ARB price must break the resistance line to the upside in the next few days. The support line was defended by the buy side several times recently. However, now is the time to make the breakout to the upside.
However, the ARB price must overcome not only the ascending trendline, but also the 50-EMA (orange) and the 200-EMA (blue) in the 4-hour chart. Otherwise, a plunge towards the support at $1.20 can be expected.
The RSI is trending downwards in the 4-hour chart and was at 42 at press time. A further price drop could generate a sell signal. In the daily chart, the RSI is showing a weakness and is hovering around the lower edge of the neutral zone.
Bullish Scenario For ARB
In a bullish scenario, Arbitrum manages to break out of the descending triangle pattern to the upside, initiating a rally to the 23.6% Fibonacci retracement level at $1.4071. Major selling pressure is expected at this point.
If the buy side succeeds in breaking above this resistance, the focus shifts to the heavy resistance zone at $1.48 (38.2% Fibonacci). The ARB price already failed here in two attempts at the end of April.
However, if the buy side can also crush this resistance, a subsequent rise to $1.6122 (61.8% Fibonacci) is possible. If Arbitrum also breaks through this price hurdle in the coming weeks, a retest of the previous month’s high at $1.82 seems more than likely.
Featured image from iStock, chart from TradingView.com
Jake Simmons has been a Bitcoin enthusiast since 2016. Ever since he heard about Bitcoin, he has been studying the topic every day and trying to share his knowledge with others. His goal is to contribute to Bitcoin’s financial revolution, which will replace the fiat money system. Besides BTC and crypto, Jake studied Business Informatics at a university. After graduation in 2017, he has been working in the blockchain and crypto sector. You can follow Jake on Twitter at @realJakeSimmons.