Fundamentals that are strongly bearish act as a tailwind for Avalanche’s technical bearish setup.
Avalanche (AVAX) increased 0.5 percent to hit $31 on the 23rd of May, but AVAX price is still trapped within the trading range, which appears to be the “bear pennant” structure.
Avalanche may be buried in technical issues
Bear pennants are continuation patterns that bear, i.e., they are formed when the price has broken through them and falls to the side, and then – as a general norm of technical analysis, they fall by at least the height that the prior downtrend often referred to as “flagpole.”
AVAX is on the verge of a breakdown as it moves towards the apex of the pennant, i.e. the point at which its upper and lower trendlines join.
This places the bearish goal for the AVAX/USD exchange rate at $11.50 by June 2022. which is down 70% from the price on May 23’s price, as shown in the following.
AVAX price: key support levels
However, AVAX’s breakdown configuration towards $11.50 might not have been met because of certain support areas.
For instance, The Avalanche token’s profile of volume indicates it trading near its points of control (POC)–the point at which traders were the most active from 2021. It was about $32.
Incredibly, the level played an important role in stopping AVAX’s downward attempts during the session between August and September 2021 and was the catalyst for an increase of 390 that saw AVAX making its record high of $150 by the end of November 2021.
This POC level also functioned as a middle point during the trend of consolidation that occurred between January 2021 to May 2021. The POC level is now an effective price floor, even when AVAX looks at the breakdown of bears pennants as we have discussed previously.
While doing so, creating an inverse graph of the Fibonacci retracement from the AVAX’s $2.75-swing lowest to $97.50-swing high shows AVAX is consolidating within its 0.618 Fib line (near $40) and 0.786 Fib line (around 23) as illustrated below.
This raises the possibility of Avalanche returning to $23 as a support level to support and then rebounding towards $40. A move like this could end up infringing on the bear pennant configuration.
As of May 23rd, Avalanche trades nearly 78 percent lower than its record high of $150, weighed down by an overwhelmingly bearish mood throughout the crypto market, in the context of a rising interest rate.
Additionally to that, the recent Terra ecosystem meltdown has increased the cost of AVAX and other cryptos.
JUST IN: CEO #AVAX claims that the company suffered a loss of 60 million dollars from the $UST and $LUNA collapse.
— Watcher.Guru (@WatcherGuru) May 22, 2022
However, the worst is in the future in the event that AVAX keeps moving in line with the most popular cryptocurrency Bitcoin (BTC) along with its global counterparts that are risk-on like Nasdaq. Correlation coefficients between Avalanche with Nasdaq were 0.91 on May 23, which indicates that they are performing in close-to-perfect harmony.
Related to: Bitcoin macro bottom not yet’, warns analyst BTC price remains at $30K
On the brighter side, AVAX has the potential to be an intermediate upside scenario, with an inverse relationship between the rising index of relative strength (RSI) and declining prices as per Scott Melker, an independent market analyst.
“There are potential bullish divergences with oversold RSI on a ton of daily altcoin charts,” Melker said. Melker then said:
“Need definitive elbow up on RSI, but I still think we have been bottoming here across markets …. for now.”
What do you think?