Avalanche (AVAX) Price Rejected by Long-Term Resistance, Is a Sharp Correction Coming?
The Avalanche (AVAX) price has been rejected by long-term resistance and formed bearish signals. It may undergo a correction in the coming days.
Long-Term Resistance
The AVAX price has been rising since touching a yearly low of $8.65 on October 19, 2023. This move helped the price break above the horizontal resistance at $15.5 and rise to the long-term resistance zone at $22.
On November 16 and 17, the price failed to break above the $22 resistance area and created long upper wicks (red arrows), a sign of selling pressure.
On November 19, the price seemed to break above this resistance zone with an upward pinbar candle. However, it turned out to be a false breakout as the subsequent bearish engulfing candle completely erased this attempt (red ellipse).
This has formed a potential bull trap and could lead to a significant correction in the near future.
The daily RSI (Relative Strength Index) has formed a significant bearish divergence and dropped below the overbought zone, indicating a potential correction.
If so, an important support zone to watch is the previous resistance at $15.5, which is 26.06% lower than the current level.
Short-Term Outlook
The hourly chart shows that AVAX is trading within an ascending parallel channel since November 16. This is a bearish pattern, often leading to breakdown in most cases.
In fact, the price is predominantly trading at the lower part of the channel, further reinforcing this outlook.
The hourly RSI also supports further decline as it breaks below the short-term support line and lies below 50.
If a short-term recovery occurs, it may only reach up to the middle of the channel at $22 and break down thereafter.
Conclusion
The most likely scenario suggests that the price of Avalanche (AVAX) will undergo a correction in the near future. Breaking below the short-term support line at $20.5 would confirm this.
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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