Going long on AVAX? Consider this ‘catch’ before you jump in

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Dis­claimer: The infor­ma­tion pre­sent­ed does not con­sti­tute finan­cial, invest­ment, trad­ing, or oth­er types of advice and is sole­ly the writer’s opinion

  • AVAX ral­lied on the dai­ly chart with a pos­si­ble MACD crossover
  • The upside break­out from the bull­ish wedge has a tar­get between $15.5 and $16.0
  • How­ev­er, the price-vol­ume diver­gence could cause a price reversal 

Since the cryp­to-crash in ear­ly Novem­ber, Avalanche (AVAX) has post­ed unsuc­cess­ful price recov­er­ies. The ral­lies only pushed AVAX low­er and low­er, break­ing through sev­er­al sup­ports along the way. 

Read Avalanche’s [AVAX] Price Pre­dic­tion 2023–24

How­ev­er, at press time, AVAX seemed deter­mined to regain lost ground. It was trad­ing at $13.05 after an upside break­out from a bull­ish wedge chart pat­tern (blue line). An ear­li­er and sim­i­lar bull­ish wedge pat­tern (blue, dot­ted ) led to a bull­ish break­out, one that drove AVAX to a new ATH of $20.61 in November. 

If his­to­ry repeats itself, AVAX could reach this new high in the next few weeks or months.

Can bulls sustain their momentum?

Source: AVAX/USDT, TradingView

AVAX’s price action curved out a falling wedge (blue, dot­ted) between Sep­tem­ber and mid-Octo­ber. After that, a bull­ish break­out, typ­i­cal of a falling wedge pat­tern, put AVAX on an uptrend from mid-Octo­ber onwards. 

The uptrend after mid-Octo­ber drew a ris­ing chan­nel (white). In most cas­es, a ris­ing chan­nel is fol­lowed by a down­trend. In AVAX’s case, the down­trend coin­cid­ed with the cryp­to-crash of ear­ly Novem­ber. The altcoin’s price crashed from $20 to $11.5, los­ing about 50% of its gains in the process.

The price move­ment of AVAX after the crash formed anoth­er bull­ish wedge chart pat­tern (blue line). If it fol­lows its pre­vi­ous trend, the bull­ish break­out could set AVAX up for anoth­er price ral­ly in the com­ing days or weeks. 

The height of the pre­vi­ous bull­ish wedge matched the height of the ris­ing chan­nel (white), lead­ing to an ATH in Novem­ber at $20.6 (100% Fib lev­el). The pre­vail­ing bull­ish wedge could also trig­ger an uptrend. Due to its height, the new tar­get could be at $15.64.

The Rel­a­tive Strength Index (RSI) seemed to be retreat­ing from the over­sold ter­ri­to­ry – A sign of sell­ing pres­sure. A pos­si­ble Mov­ing Aver­ages Con­ver­gence Diver­gence (MACD) crossover also revealed that buy­ers have been inch­ing clos­er to control. 

How­ev­er, the On Bal­ance Vol­ume (OBV) pro­ject­ed a slight uptick after mak­ing a series of lows since late Sep­tem­ber. It under­lined low trad­ing vol­ume that could under­mine buy­ing pressure. 

An intra­day can­dle­stick close below the press time sup­port at $11.46 would inval­i­date the above bull­ish bias. In this case, AVAX could extend its decline to new sup­ports at $9.3 or $8.5. 

Price-volume divergence and decline in development activity

Source: San­ti­ment

Accord­ing to San­ti­ment, AVAX’s devel­op­ment activ­i­ty steadi­ly increased from mid-Octo­ber. The price also appre­ci­at­ed sig­nif­i­cant­ly, as shown in the chart above and the ris­ing chan­nel (white) on the price chart. 

How­ev­er, devel­op­ment activ­i­ty declined from the end of Octo­ber, only to rise in mid-Novem­ber and fall after­wards. The price fol­lowed the trend with all con­sis­ten­cy. More­over, price inclines cor­re­spond­ed to pos­i­tive­ly weight­ed sen­ti­ment and vice versa. 

At press time, a price-vol­ume diver­gence revealed falling trad­ing vol­umes with ris­ing prices. This prob­a­bly is a sign of an immi­nent price correction. 

There­fore, it may be worth­while for long-term investors to track AVAX’s devel­op­ment activ­i­ty and sentiment.

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