Key Takeaways:
- Avalanche (AVAX) price started correcting after reaching its best levels in two months.
- On the daily chart, AVAX is witnessing a bearish divergence between its price and momentum.
- But long-term, Avalanche looks skewed toward bulls.
NEW DELHI (CoinChapter.com) — An ongoing uptrend in the Avalanche (AVAX) market appears to be hitting exhaustion in the short term. However, the token’s long-term prospects remain skewed to the upside. Let’s dive.
Avalanche (AVAX) Price Detects Bearish Divergence
AVAX’s price closed at around $17 on Jan 24 after a circa 5.5% intraday decline. Earlier on the same day, the token had reached $19, its highest price level since November 2022.
In other words, most traders decided to secure their profits at the two-month high than build new long positions.
At least one technical indicator explains why. In detail, the AVAX price and its daily relative strength index (RSI), a technical indicator that measures an asset’s oversold and overbought levels, have been diverging from each other since mid-January.
The AVAX price has been forming higher highs while the RSI, now in its overbought region, has been making lower highs, which technically means a bearish divergence. In a perfect scenario, a bearish divergence hints at bulls losing the market’s control, leading to a price correction period.
Simultaneously, AVAX shows a weakness in its upside bias by testing $19.70 as its interim resistance level. Sellers have previously become active around the same level, which raises anticipations that AVAX will start correcting by late January or early February.
Suppose a correction occurs. Then, the AVAX price’s next downside target is around $15, another historical support level. Such a move would also enable the Avalanche’s daily RSI to neutralize its overbought readings.
Long-Term Bullish Sentiment Intact
On a longer-timeframe chart, AVAX’s correction prospects are a blip against its massive upside potential.
Notably, the $15-19 range appears to be AVAX’s last leg before it pursues its broader bullish target inside the $27-30 price area.
That looks possible mainly due to favorable risk-on indicators, including the Federal Reserve’s likelihood to ease its interest rate hiking spree at the end of their two-day meeting on Jan 31 and Feb 1. In addition, Avalanche’s partnership with Amazon has created the right buzz for its layer-one blockchain solutions, which may also help AVAX price rally in the long term.
