Chainlink price downtrend to deepen, following record-breaking rally and rejection
Chainlink price recently saw a record-breaking rally, ending an intraday rally with gains of more than 30% on the day. The bounce continued to rise but has since turned back at the top of the downtrend channel which so far held.
Will a downtrend bring cryptocurrencies lower? And what other factors support any theories that predict a further decline in altcoins ahead?
Chainlink price downward trend to depen, followed record-breaking rally and rejection
Last week, after scanning lows, Chainlink rebounded from under $ 8 back to over $ 11 at its local highs. A gain of more than 30% broke the record for the greenest day of 2020 – a year the altcoin was almost unstoppable. At press time, LINK is trading around at $ 9.85, down nearly 4% in the last 24 hours.
The year begins with the cryptocurrency setting new highs, only to crash in Black Thursday’s carnage to near zero. The bounce from the lows put Chainlink on a journey towards price discovery mode and eventually peaked at $ 20 per LINK token.
From that peak, however, a downtrend channel formed, and despite a record-breaking rally last week, the cryptocurrency has failed to break. Failure to break out of the downtrend can lead to new local lows.
LINKUSD Daily Downtrend Pitchfork Channel | Source: TradingView
Downtrend channels are subjective, extending through the manual price action using technical analysis drawing tools. But technical analysis indicators are created using the correct mathematical formulas, leaving little room for user interpretation and error.
These various tools also show that Chainlink is ready for another sale.
According to Bollinger Bands, a volatility measurement tool that includes a moving average and two standard deviations, Chainlink has just been excluded from the “mid-BB”. Rejection from this area, usually followed by a retest of the lower frequency range.
Get back the mid lane, which will suggest the reverse, and send the Chainlink towards the top of the band.
LINKUSD Daily Middle Bollinger Bands Rejection | Source: TradingView
According to the Bollinger Bands, a volatility measuring tool consisting of a moving average and two standard deviations, Chainlink was just rejected from the “mid-BB.” Rejections from this area, often are followed by a move to retest the lower band.
Reclaiming the middle-line, would suggest the opposite and send Chainlink towards the top of the band. The Bollinger Bands aren’t the only indicator backing up the idea behind the downtrend channel. The Ichimoku indicator also paints an extremely bearish picture.
The “at a glance” indicator says a lot about price action. Looking backward on the chart, the chikou span, or lagging span, shows the price line hanging onto weak support.
LINKUSD Daily Ichimoku Rejection | Source: TradingView
The chikou span traces back 26 trading sessions and helps plot support and resistance levels. The chikou span looks back, but the cloud looks ahead. The cloud itself is twisted bearish, suggesting bearish future price action.
Finally, the kijun-sen (red) is above the tenkan-sen (blue) line signaling bearish price action, and Chainlink itself is in the process of being pushed down further by the kijun-sen.
Using the Ichimoku indicator to find potential levels of support lower than the previous level that held, points to targets of $6 and $4.80 per LINK token. Unless the cryptocurrency can burst upward out of the downtrend channel, that is.
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