Avalanche is getting close to a major failure level that could drive AVAX prices down another 65%.

Avalanche (AVAX) rose 0.5% on May 23rd to reach above $31, but AVAX price is locked within a trading range that appears to be a “bear” structure.

Avalanche can bury skills.

A bearish pennant is a bearish continuation pattern. In other words, the price resolves after falling and, according to the principles of technical analysis, declines by the height of the previous downtrend, also known as the “flagstick”.

AVAX is approaching a technical collapse as price moves towards the peak of the pennant, where the upper and lower trendlines converge.

This draws a bearish target for the AVAX/USD pair through June 2022 at $11.50, down about 65% from today’s price, as shown below.

AVAX/USD daily price chart with ‘bare pennant’ analysis settings. Source: TradingView

AVAX Pricing: Main Support Levels

Conversely, AVAX’s analytics setup for $11.50 may fall short due to certain key areas of support.

For example, the volume profile of the Avalanche token shows that it is trading at around $32 near its point of control (POC), which has been the most active for traders since 2021.

Interestingly, this level played a key role in preventing AVAX from attempting a decline in the August-September 2021 session. At the end of November 2021, AVAX was ahead of its 390% gain, which hit a record high of around $150.

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AVAX/USD daily price chart with volume profile. Source: TradingView

The POC level also served as a median during the consolidation trend observed between January 2021 and May 2021. Now, even if AVAX observes a downward pennant analysis as discussed above, it remains at the price floor.

Meanwhile, if we create a Fibonacci retracement graph from AVAX’s $2.75 swing low to $97.50 swing high, we see AVAX consolidating between the 0.618 Fib line (near $40) and the 0.786 Fib line (around 23) as shown below.

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AVAX/USD weekly price chart showing Fib support and resistance levels. Source: TradingView

This increases the chances of a rebound to $40 after the Avalanche retests the $23 support level. Such a move risks negating the bear pennant setting.

fundamentally weak

Today, Avalanche is trading under strong bearish sentiment elsewhere in the cryptocurrency market in a higher interest rate environment, trading almost 78% below its high of around $150.

Additionally, the recent Terra ecosystem collapse underscored the decline in prices of AVAX and other cryptocurrencies.

However, the worst is yet to come if AVAX continues its trend of synchronizing with the top cryptocurrencies Bitcoin (BTC) and global risk factors such as Nasdaq. The correlation coefficient between Avalanche and Nasdaq is 0.91 as of May 23, indicating that they are moving in near-perfect tandem.

RELATED: Bitcoin macro bottom ‘yet’ warns analysts as BTC price holds $30K

According to independent market analyst Scott Melker, AVAX shows the potential for a mid-rise scenario with a divergence between a rise in RSI (Relative Strength Index) and a fall in price.

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AVAX/USD daily price chart showing bullish divergence. Source: Scott Melker/TradingView

“There is potential bullish divergence as the RSI is oversold on many daily altcoin charts,” Melker added.

“We need a decisive elbow lift for the RSI, but I still think we are hitting a bottom across the market. For now.”

The views and opinions expressed herein are solely those of the authors and do not necessarily reflect the views of Cointelegraph.com. All investments and trading involve risks and you should do your own research when making decisions.

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