- ICP rallies again with 30 percent gain after a brief downtrend
- Technicals on the daily chart indicate a bearish phase might be approaching
- What’s behind the bullish rally?
Yerevan (CoinChapter.com) – Internet Computer (ICP), one of the newest smart contract platforms, logged another 30 percent gain in a rapid 24-hour rally. The uptrend followed a bearish day on August 8 and saw the asset jump to its 6-weeks high of $69.0 before slightly correcting to $65.7 hours ahead of the New York session Monday.
ICP 4h chart
Internet Computer four-hour chart presented both bullish signs and bearish red lights. The digital asset had been on an uptrend from August 6-7. When the trend reversed on August 8, ICP sought support from the 20-hour exponential moving average (EMA-20; blue wave on the chart below).
DESPITE THE TEMPORARY SETBACK, the EMA-20 maintained the near-vertical uptrend and traded way above the 50-hour simple moving average(SMA-50). Moreover, Internet computer’s EMA-20 and SMA-50 registered a golden cross on August 6, right after the consolidation period.
In hindsight, the golden cross formation occurs anytime a short-term MA crosses above a long-term MA. Thus, it indicates future gains and an upcoming bullish phase for as long as the short-term MA holds the position.
On the other hand, the relative strength index (RSI: momentum indicator, the purple graph at the bottom of a chart) flashes warning signs of a bearish divergence.
A bearish RSI divergence happens when the price action registers higher highs, while the RSI chart shows lower highs. This indicator is a strong bearish predictor, as it shows that the bullish momentum is exhausting itself. Moreover, the RSI has moved into the overbought territory (above 70). An RSI over 70 gives traders the fear of investing in an overbought asset, so they typically pull back their bids to hedge their capital.
Factors behind the rally
Internet Computer adoption has been growing over the past few months. The company announced on August 4 that they’d enjoyed a 786% increase in “Canister” smart contracts on the blockchain.
Canisters are smart contracts that scale — interoperable compute units designed for internet-scale services.reads the description.
Canisters help build an open and collaborative internet, as they are essential to the Internet Computer ecosystem. The Internet Computer Protocol guards the security of a canister. Therefore it’s impossible to tamper with. Furthermore, the state of a canister can be audited by inspecting messages in the blockchain, thus keeping the process cryptographically secure.
Internet Computer executes many canisters simultaneously, while a single canister has only one thread of execution and updates.
The rapid adoption of canister contracts might have contributed to the recent rally. However, in particular, the technical indicators, RSI divergence, points to a downtrend in the short term. The upcoming sessions will show if the prognosis has merit.