A new technical analysis shared by trader Trader Tardigrade suggests Ethereum (ETH) may be entering a decisive phase, as its weekly chart begins to mirror a classic bullish reversal structure. According to the analysis, Ethereum is forming an inverse head and shoulders pattern on the weekly timeframe, one of the most widely followed long-term bullish formations. This structure typically signals a transition from a corrective phase into a renewed uptrend when confirmed.
The chart highlights three key components: the left shoulder formed during Ethereum's earlier pullback, followed by a deeper decline that created the head, marking the cycle low. More recently, price action has carved out the right shoulder, which appears structurally similar to the left, an important symmetry that strengthens the setup. The right shoulder complex shows Ethereum has begun to break higher after consolidating above local support, mirroring behavior seen during the left shoulder phase and suggesting downside pressure is fading.
Ethereum is currently pressing into a rising resistance band, the neckline zone of the pattern. This area has capped price advances multiple times in the past, making it the most critical level on the chart. A clean weekly close above this resistance zone would be the technical confirmation traders look for. Historically, confirmed inverse head and shoulders breakouts often lead to measured moves that extend well beyond prior highs, especially when they appear on higher timeframes like the weekly chart.
From a technical perspective, the structure implies two main scenarios: a bullish continuation where a sustained breakout above the neckline could open the door to a strong upside expansion phase, or a failed breakout risk where rejection at resistance would likely send price back into consolidation.
Separately, Ethereum price action shows it has broken a bearish descending channel structure that had been in place since early October. This week, the price finally pushed above the upper trendline, signaling the bearish structure has been broken. This breakout was supported by a bullish divergence observed between October 10 and December 18, where the Ethereum price made a lower low while the Relative Strength Index (RSI) made a higher low, signaling weakening selling pressure.
However, the reversal faces friction. Between December 10 and January 5, the Ethereum price is forming a lower high (still incomplete), while the RSI is forming a higher high, creating a hidden bearish divergence which usually points to consolidation or a pullback. If the next candle forms under $3,220, it would confirm this bearish pattern.
A significant short-term risk comes from derivatives positioning. On the Binance ETH/USDT liquidation map, long liquidation leverage sits near $2.20 billion, while short liquidation leverage is just around $303 million, meaning long exposure is more than seven times larger. The thickest liquidation clusters show that long liquidations begin around $3,150 (current price) and extend down toward $2,850. A sharp move into this zone could trigger a cascade, potentially dragging the Ethereum price lower.
Contrasting this, whale activity shows strength. Over a recent weekend alone, Ethereum whales increased their holdings from 101.31 million ETH to 101.63 million ETH, adding roughly 320,000 ETH worth about $1.0 billion at current prices, suggesting large holders are positioning for upside.
The critical test for Ethereum is now a move above $3,470, representing roughly a 10% rally from current prices. This would invalidate the hidden bearish divergence by pushing the price to a higher high and move Ethereum away from the densest long-liquidation cluster. If achieved, it could open the door toward $3,910, followed by $4,250 if momentum builds further. On the downside, losing the $2,850 support would weaken the reversal thesis and re-expose ETH to deeper downside risk.
