Avalanche (AVAX) gained 0.5% to break above $31 on May 23, but AVAX price remains trapped inside a trading range that looks like a “bearish pennant” structure.
Avalanche could be buried for its technical aspects
Bearish pennants are downward continuation patterns, that is, they are resolved after the price breaks down and then – as a rule of technical analysis – falls as much as the height of the previous downtrend, also called “pole”. flag”.
AVAX is approaching a technical breakout as its price moves towards the apex of the pennant, i.e. the point where its upper and lower trend lines converge.
This paints the bearish target for the AVAX/USD pair at $11.50 for June 2022, down 65% from the current price, as shown below.
Key Support Levels for AVAX Price
Conversely, the AVAX breakout setup towards $11.50 could fall short due to some key support areas.
For example, the volume profile of the Avalanche token shows that it is trading near its Point of Control (POC) – the level at which traders were most active since 2021 – around $32.
Interestingly, this level was instrumental in curbing AVAX’s bearish attempts on the August-September 2021 dates; preceded a 390% bull run, which saw AVAX hit its all-time high of around $150 in late November 2021.
The POC level also served as a median during the consolidation trend witnessed between January and May 2021. Now, it stands as a price floor even as AVAX sees the bearish pennant breakout, as discussed above.
Meanwhile, creating a Fibonacci retracement chart from the swing low of $2.75 to the swing high of $97.50 shows AVAX consolidating between its 0.618 line (near $40) and the 0.786 (about $23), as shown below.
This raises the possibility of the Avalanche retesting $23 as support, followed by a bounce move towards $40. This move could invalidate the bearish pennant setup.
bearish fundamentals
Today, Avalanche is trading nearly 78% below its all-time high of around $150, weighed down by strong bearish sentiment elsewhere in the cryptocurrency market in a higher interest rate environment.
Furthermore, the recent collapse of the Terra ecosystem has also dragged the prices of AVAX and other cryptocurrencies lower.
JUST IN: #AVAX CEO says the company lost $60 million from the $MOON and $UST collapse.
— Watcher.Guru (@WatcherGuru) May 22, 2022
But the worst is yet to come if AVAX continues to trend in sync with top cryptocurrency Bitcoin (BTC) and in turn its global venture counterparts like Nasdaq. The correlation coefficient between the Avalanche and the Nasdaq was 0.91 as of May 23, showing that they have been moving in almost perfect tandem.
On the upside, AVAX promises an interim bullish scenario with a divergence between its relative strength index (RSI) on the upside and prices on the downside, according to Scott Melker, an independent market analyst.
“There are potential bullish divergences with the RSI oversold on a ton of altcoin daily charts,” Melker said, adding:
“I need a definite elbow on the RSI, but I still think we’ve bottomed out here through the markets…for now.”
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