Ethereum's native token Ether (ETH) rates may fall to a two-calendar month depression after it slid below support at around $two,954, based on a classic trading pattern.

The $2,954 level represents a so-called neckline constituting a head and shoulders setup. In particular, the said support level appears to be a floor to iii peaks, with the heart i (Caput) college than the other 2 (SHOULDERS).

A breach beneath the $ii,954 level signals a tendency reversal, suggesting that ETH/USD may fall by a length equal to the distance betwixt the head's summit and neckline.

ETH/USD daily cost chart featuring head and shoulders design. Source: Peter Brandt

Peter Brandt, CEO of global trading firm Gene LLC, shared the bearish design late on Sept. 20, noting that a successful breakdown below $ii,954 could crash prices to around $2,000.

"I am Non saying I believe information technology, and I am maxim I am not shorting it — merely like information technology or non, if you own ETH, yous will have to deal with it. This possible H&Due south exists, whether information technology is completed, fails, or morphs, it exists."

Inquiry conducted by Samurai Trading Academy notes that head and shoulders attain their projected target near 85% of the time.

Bullish outlook

Ether traded at $2,805 as of 00:22 UTC, its lowest level since Aug seven. However, the cryptocurrency later recovered to reach an intraday loftier of $3,104 and was wobbling around $3,000 at the time of writing.

The seesaw price moves came every bit a part of a correction trend that started later ETH/USD formed a sessional top at $4,030 on Sept 3. As a result, the pair initially brutal by as much every bit 25.34% to hit $3,009. It then recovered back to as high as $3,675.

Nonetheless, bulls started losing control all over again at the start of this week as a wave of selling triggered by a tumult in China'due south heavily indebted belongings sector hit crypto and traditional markets alike.

Ether dropped by 10.58% on Sept. 20.

Some analysts anticipate that the Ethereum token would recover once again if its toll held to a higher place celebrated support levels. For instance, pseudonymous chartist PostyXBT mentioned $ii,850 equally "an important level" that kept Ether'southward bullish bias intact.

"Good to come across ETH testing a cardinal level of support at the same fourth dimension equally BTC," the Twitterati noted.

"Similar to BTC at ~$40k, ~$2850 is an important level that must hold."

PostyXBT'southward nautical chart setup envisioned ETH/USD to retest $four,000 in the coming sessions.

ETH/USD weekly toll chart featuring $2,850 level'south history as support and resistance. Source: TradingView.com, PostyXBT

The Crypto Monk, another pseudonymous analyst, added that the latest declines flushed out weak traders and presented opportunities for strong easily to buy and ship the Ether prices to a new all-time high.

Related: Bitcoin in 'good shape' as long equally BTC toll stays in a higher place $40K — Mike Novogratz

Brandt also noted that ETH/USD'southward drop might lead to a potential "carry trap," a technical pattern that occurs when an nugget's toll performance incorrectly signals an end of a bullish trend. Every bit a consequence, traders with leveraged short positions could suffer losses should the spot ETH/USD rates rebound.

"I have a strong suspicion that recent weakness, especially overnight, successfully washed out weak longs and might take trapped some bears," Brandt wrote.

"Of course, subsequent price action would need to confirm this."

The views and opinions expressed hither are solely those of the author and do not necessarily reverberate the views of Cointelegraph.com. Every investment and trading motion involves risk, you should conduct your own inquiry when making a decision.