Avalanche: The risk being 2% of the capital, a retest of this level can be used to go…
Disclaimer: The information presented does not constitute financial, investment, trading or other advice and represents the opinion of the author only.
Avalanche has been quite bearish on the charts, but on shorter time frames the $28 and $24 levels have been important support levels for the past two weeks. At press time, Avalanche was trading below both of these levels and offered an opportunity to take a short position on the coin.
Bitcoin lacked upside strength as it rebounded weakly from the $28.7,000 support level. Ethereum was also losing value, and if these two market leaders see a big drop, AVAX should follow quickly.
AVAX – 1 day chart
On the daily chart, we can see that the price has established a series of lower highs since November. The market structure turned bearish in January when the price slipped below $79.8 after hitting a lower high in December.
At the end of March, the price rallied back to $100 again, but that didn’t lead to the break-up that buyers might have hoped for. Instead, a firm decline at $100 was followed by an almost 80% decline in April and May.
The price still has not entered an accumulation phase, and further lows could be seen after a session close below $24.
AVAX – 4 hour chart
A set of Fibonacci Retracement and Extension levels (yellow) have been drawn based on AVAX’s decline from $69.52 to $23.51. At the time of writing, the price has fallen back below the $23.51 level. This meant that the price was quite likely to continue further south and head towards the 23.6% extension level at $12.65.
Ahead of $12.65, there are two more important support levels at $20.81 and $15.6 where AVAX might see a bullish reaction. The $20.8 level served as support in April 2021 but retested as resistance in June, while $15.6 served as support in May but also tipped into resistance in June.
Last year’s drop took the price to $9.4, and another such drop cannot yet be expected for Avalanche. After all, many once popular altcoins have fallen 80% and then another 80%.
Level by level, the confluence of support in the $23-$24.5 area has been broken and therefore the bias remains bearish. The price could rebound all the way to $25 without changing the bias. However, a move to $26 could indicate the need to scale back the trade and reassess market sentiment.
The RSI was below 30 and showed a value of 22.69 on the 4-hour chart, which was extreme bearish momentum. The CMF was also below -0.05 to show significant selling pressure, and the OBV also dipped below the low it hit last week. Taken together, the indicators on the lower time frame showed the strength of the bears.
A retest of the $23 level can be used to enter short positions, with the risk being a maximum of 2% of trading capital, or even lower depending on the trader’s risk appetite. The stop-loss sits at $26.04, 13.2% above the entry level, while the $15.6 can be used to take profits.
If AVAX breaks below the $22 mark and reaches the $20.81 support level, the stop-loss may eventually break even and a partial take profit may also be taken depending on market conditions.