Avalanche (AVAX) gained 0.5% to reach over $31 on May 23 but AVAX price remains trapped inside a trading range that appears like a “bear pennant” structure.
Avalanche could get buried technicalsÂ
Bear pennants are bearish continuation patterns, i.e., they resolve after the price breaks out of them to the downside and then-as a rule of technical analysis-falls by as much as the height of the previous downtrend, also called “flagpole.”
AVAX is nearing a technical breakdown as its price moves toward the pennant’s apex, i.e., the point where its upper and lower trendlines converge.
This paints the bearish target for the AVAX/USD pair at $11.50 by June 2022, down about 65% from today’s price, as shown below.
AVAX/USD daily price chart featuring ‘bear pennant’ breakdown setup. Source: TradingView
AVAX price: key support levels
Conversely, AVAX’s breakdown setup toward $11.50 could fell short due to certain key support areas.
For instance, the Avalanche token’s volume profile shows it trading near its point of control (POC)-the level where the traders were most active since 2021-around $32.
Interestingly, the level was instrumental in capping AVAX’s downside attempts in the August-September 2021 session; it preceded a 390% bull run, which saw AVAX reaching its record high of around $150 in late November 2021.
AVAX/USD daily price chart featuring volume profile. Source: TradingView
The POC level also served as a median during the consolidation trend witnessed between January 2021 and May 2021. Now, It holds as a price floor even as AVAX eyes the bear pennant breakdown, as discussed above.
Meanwhile, creating a Fibonacci retracement graph from AVAX’s $2.75-swing low to $97.50-swing high shows AVAX consolidating between its 0.618 Fib line (near $40) and 0.786 Fib line (around 23), as shown below.Â
AVAX/USD weekly price chart featuring Fib support and resistance levels. Source: TradingView
That raises Avalanche’s possibility of retesting $23 as support, followed by a rebound move toward $40. Such a move would risk invalidating the bear pennant setup.
Fundamentally bearish
Today, Avalanche trades nearly 78% below its record high of around $150, burdened by a strong bearish sentiment elsewhere in the crypto market in a higher interest rate environment.
In addition, the recent Terra ecosystem meltdown has also stressed the prices of AVAX and other cryptos lower.
JUST IN: #AVAX CEO says the company lost $60 million from the $LUNA and $UST collapse.
– Watcher.Guru (@WatcherGuru) May 22, 2022
But the worst is still yet to come if AVAX continues trending in sync with the top crypto Bitcoin (BTC) and, in turn, its global risk-on counterparts, such as Nasdaq. The correlation coefficient between Avalanche and Nasdaq was 0.91 as of May 23, showing that they have been moving in near-perfect tandem. Â
Related: Bitcoin macro bottom ‘not in yet’ warns analyst as BTC price holds $30K
On the brighter note, AVAX shows promise of an interim upside scenario with a divergence between its rising relative strength index (RSI) and falling prices, according to Scott Melker, an independent market analyst.
AVAX/USD daily price chart showing bullish divergence. Source: Scott Melker/TradingView
“There are potential bullish divergences with oversold RSI on a ton of daily altcoin charts,” said Melker, adding:
“Need definitive elbow up on RSI, but I still think we have been bottoming here across markets…. for now.”
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