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Avalanche (AVAX) Price May Have Started a Deep Correction, Here’s Why?

The Avalanche (AVAX) price has formed a bearish pattern as it approached a crucial resistance zone. It may undergo further correction in the near future.

Weekly Outlook

The Avalanche (AVAX) price dropped after reaching the yearly high at $50 on December 24, 2023. This high was slightly below the long-term resistance zone at $54.

During the week of December 25 to 31, 2023, the AVAX price declined significantly, creating a bearish engulfing pattern (red ellipse). This is a bearish pattern typically appearing at the end of an uptrend.

Indeed, the AVAX price formed a large bearish candle with a long upper wick last week, confirming the end of the previous uptrend and signaling a deep correction.

The weekly RSI (Relative Strength Index) dropped below 70 and is sloping down, indicating that the bulls have lost control.

Therefore, the AVAX price may continue to correct towards the $22-$24 zone, formed by the previous horizontal resistance zone and the 0.618 Fibonacci retracement level.

This figure corresponds to a 34.57% decrease from the current price.

AVAX/USDT weekly chart . Source: TradingView

Breaking Below the Key EMA

The daily chart reveals that the AVAX price has broken below the 20-day EMA (Exponential Moving Average), which provided support during the upward movement (green arrows). This also confirms that the AVAX price is undergoing a correction in response to the previous uptrend.

Although the AVAX price bounced from the minor support at $31 and formed a bullish candle yesterday, it may face strong selling pressure at the 20-day EMA ($38.12).

The daily RSI has dropped below 50 and is sloping down, indicating that the bears have regained control.

Thus, the AVAX price might be rejected by the 20-day EMA and decrease to the $31 zone once again.

AVAX/USDT daily chart . Source: TradingView

Conclusion

The most likely scenario suggests that the AVAX price will continue to correct in the near future. The immediate target is $31, and a further decline to $22-$24 is possible.

This bearish outlook would be invalidated if the price reclaims the 20-day EMA and breaks above the recent top at $43.42.

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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