The chart of Ethereum (CRYPTO:ETH) illustrates an important market dynamic.
When stocks or cryptocurrencies are in rally mode, levels that had been resistance convert into support levels. These new support levels set the stage for another move higher. It happens because of seller’s remorse.
Investors who sold Ethereum at the $1,950 resistance levels believe they made the right decision when it trended lower after. This happened in February and March.
But in early April, ETH rallied and broke through this resistance. Many of these sellers now think they made a mistake.
A number of them decide to buy ETH back, but they will only do so if they can get it for the same price they sold at. This way they can erase their mistake.
This results in buy orders being placed at a level that had been resistance, which creates support. If there are enough of these buy orders, the level that was resistance turns into a support level.
The $1,950 level is now support for ETH.
XRP (XRP) has formed a reversal pattern. It shows the bears have taken control from the bulls and have been knocking it lower.
If XRP continues to fall, there is a good chance there will be support around the $1.10 level. It was a resistance level earlier this month.
Cardano (CRYPTO:ADA) ran into resistance at the $1.10 level in February and March then broke through it on April 13.
Now ADA is trading below this level, whichs shows weakness and is bearish.
While markets are rising, the conversion process from resistance to support is common. When it doesn’t occur, it’s a sign of weakness. ADA could continue to trend lower.
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