Avalanche (AVAX) Price Faces A Drop Of More Than 50% After Losing Key Support
The price of Avalanche (AVAX) has broken down below a long-term horizontal support area. It is likely to continue to decline in the near future.
The price of Avalanche (AVAX) has been decreasing since reaching a yearly high of $22 in February 2023. During this period, the price dropped to the support zone at $10.7 in early June and bounced up afterward.
This upward movement formed a double bottom pattern compared to the low created in December 2022. Double bottom patterns often indicate a reversal of the previous downtrend. The pattern is more significant when it appears on the weekly timeframe and is combined with bullish divergence in the RSI indicator.
However, instead of starting a strong uptrend in the following weeks, the AVAX price was rejected by the horizontal resistance at $15.7 in early July (yellow arrow). Afterward, the price dropped below the $10.7 support and confirmed it as resistance last week (red arrow).
This is an extremely bearish signal, marking the continuation of the downtrend. The weekly RSI indicator has also broken below the bullish divergence line and is trending downward, supporting the continuation of the downtrend.
Therefore, the AVAX price is likely to continue to decline towards the next significant support area at $4.7, marking a decrease of more than 50% from the current level.
Despite the bearish outlook from the weekly timeframe, the daily chart suggests a possible recovery in the coming days. This is due to positive developments in the RSI indicator.
The RSI indicator has formed significant bullish divergence and has moved out of the oversold zone. This is a common sign before recovery phases.
As a result, the AVAX price could recover to the resistance zone at $11 in the next few days.
The most likely technical outlook suggests that the AVAX price will continue to decline in the near future. However, a short-term recovery to the $11 resistance zone is likely to occur before the price continues to decrease.
The long-term bearish view could be invalidated if the AVAX price closes a weekly candle above $10.7 and confirms it as support. At that point, this action would indicate that the previous breakdown was a bear trap.
Disclaimer: Please note that this article is for informational purposes only and should not be taken as investment advice. As an investor, it is important to do your own research before making any decisions. We are not responsible for any investment decisions you make based on this information. Not Financial Advice.
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