Originally published on: February 02, 2023
AvalancheAVAX enthusiasts need to be prepared for potential downside risks as the price faces a ‘bull trap’ scenario in February. There is a noticeable divergence between key indicators on the daily timeframe chart, signaling a possible price correction.
The daily chart for AVAX reveals a classic bearish divergence between its price and the relative strength index (RSI), a momentum oscillator that has been forming since January 11. Despite the coin’s price making higher highs, the RSI has been showing lower highs. This discrepancy suggests a loss of momentum in the AVAX/USD pair, indicating a potential price reversal.
Moreover, the declining trading volumes during the uptrend of AVAX add to the bearish signals in the market.
While Avalanche has seen a remarkable rally of over 100% year-to-date to reach $22.50 by February 2, supported by positive risk sentiments and a partnership with Amazon, caution is advised as the price-RSI and price-volume divergences cast a shadow on the current bullish trend.
AVAX managed to break above two significant resistance levels, a descending trendline and its 200-day exponential moving average, during its recent uptrend. The next challenge for Avalanche is a breakout above $22.75, a level that has acted as a strong resistance since August 2022, with a potential target of $30 as the next upside goal.
On the flip side, if AVAX fails to sustain its bullish momentum and retreats from the resistance level, a correction towards the 50-day EMA around $15–$16, approximately a 30% decline from current levels, could be on the cards.
It is essential to note that this article does not provide investment advice. Readers are encouraged to conduct their own research and analysis before making any investment decisions. Stay informed about potential market movements and investment opportunities by subscribing to our Markets Outlook newsletter for valuable insights every Monday. By subscribing, you agree to our Terms of Services and Privacy Policy.
