Disclaimer: The findings of the following analysis are the authors’ sole opinions and should not be considered investment advice.
As buyers pressured the $0.41 resistance, bears reacted quickly with a steep decline towards Algorand’s [ALGO] multi-month lows. The market-wide pulls accelerated the alt’s southerly journey towards the USD 0.29 support.
While the recent recovery collided with the 61.8% Fibonacci resistance, the resulting rebound may slow ALGO’s near-term recovery prospects. At the time of writing, ALGO was trading at $0.31788, up 13.04% in the last 24 hours.
ALGO 4 Hour Chart
After buyers lost their lead near the $0.41 resistance, ALGO saw a series of red candles following a bearish candlestick engulfed. The alt lost more than a third of its value in just six days (June 9-15) and hit its 16-month low on June 15.
The recent bullish engulfed candlestick nullified selling pressure by triggering double-digit 24-hour gains. But the 61.8% Fibonacci resistance coincided with the 55 EMA and created a stiff barrier for the buyers.
ALGO also registered a more than 65% increase in trading volumes in addition to recent gains. This reading showed a robust buying move, but the broader trend was still in favor of the sellers.
The traders/investors should watch out for a close below the 20 EMA and the USD 0.3101 support. A drop below this level could lead ALGO to its Point of Control (POC, red) in the $0.29 zone. Any kickback from the ribbons could cause an extended squeeze phase.
Over the past five days, the RSI has marked higher highs as it jumped above equilibrium. But the resulting bearish divergence with price pulled the index below the midline. A drop below the 47-45 range would confirm the possibility of a short-term slowdown on the chart.
Aroon Up’s (yellow) recent trajectory showed a purchase intention. Closing below 70% could hamper recovery chances.
The confluence of the 61.8% level, 55 EMA, and the bearish divergence of the RSI could cause a prolonged decline. Any close below the USD 0.31 zone could expose the alt to a 6-7% downtrend towards the POC before a trend reversal move occurs.
A return of the 20 EMA could help buyers retest the 61.8% level in the coming sessions.
Finally, the investors/traders should keep a close eye on Bitcoin’s movements as ALGO shares a 72% correlation with the king coin for 30 days.
This post Algorand: Here’s How This Divergence Could Play Out for ALGO Traders
was published first on https://ambcrypto.com/algorand-heres-how-this-divergence-could-play-out-for-algo-traders/