IOTA: Should traders continue shorting the token in the coming days

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Over the last few months, IOTA’s move­ment has unequiv­o­cal­ly backed the bear­ish nar­ra­tive. An extend­ed cor­rec­tion from Sep­tem­ber 2021 highs iden­ti­fied the end of a bull cycle. The cur­rent streak of bear runs has led the alt to take a plunge toward its mul­ti-month base­line at the $0.389-level.

Giv­ing due impor­tance to the liq­uid­i­ty range, the alt­coin still need­ed to top­ple the 23.6% hur­dle to reignite any chances of a strong bull run. At press time, IOTA trad­ed at $0.4372, up by 1.81% in the last 24 hours.

IOTA Dai­ly Chart

Source: Trad­ingView, IOTA/USDT

IOTA saw a sub­stan­tial break­down from the upper trend­line of its long-term down-chan­nel (white). After being able to bare­ly hov­er above the 20 EMA (red) and the 50 EMA (cyan), the sell­ers pulled the alt back into its south­bound jour­ney while the mar­ket-wide liq­ui­da­tions heightened.

As a result, the alt­coin lost over 60% of its val­ue over the last 40 days. With the buy­ers show­ing some deter­mi­na­tion to defend the 15-month base­line at the $0.38-level, IOTA could with­stand the recent sell-offs.

The $0.44-mark has assumed an impor­tant region to deter­mine the quan­tum of a poten­tial rever­sal. A sus­tained close below this mark would like­ly lead to a retest of the $0.38 base­line. On the flip side, any close above this mark would lead the alt into a low liq­uid­i­ty range and thus increase the chances of fur­ther recovery.

Ratio­nale

Source: Trad­ingView, IOTA/USDT

The Rel­a­tive Strength Index has unde­ni­ably paint­ed a bear­ish pic­ture while it strug­gled to break the shack­les of its over­sold lows. Any pull­backs at the 34-mark would affirm the exis­tence of a bear­ish diver­gence and could delay the revival phase. 

The Aroon up (yel­low) has been sweep­ing the zero-mark for the last five days. A con­tin­ued move­ment in the days to come would fos­ter a tight phase on the charts. Post this, a like­ly revival from this mark would expose the alt to short-term recovery.

Con­clu­sion

The gap between the 20 EMA and 50 EMA has over­stretched. Con­sid­er­ing this read­ing cou­pled with over­sold read­ings on its RSI, IOTA could stall the cur­rent sell­ing spree. The $0.44-mark would be a deter­min­ing lev­el for fur­ther recov­er­ies or a squeeze phase with a base­line at the $0.38-level. 

Final­ly, investors/traders must keep a close watch on Bitcoin’s move­ment affect­ing the over­all per­cep­tion of the market.

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