- Monero prices rebounded nearly 13% on Friday after four days of sell-off.
- However, XMR's jump might just be a dead cat bounce.
NEW DELHI (CoinChapter.com) — Monero prices rebounded as it started the weekend after four days of brutal sell-offs. However, it remains unclear if the jump is a sign of trend reversal or a brief recovery in the downtrend, also known as a dead cat bounce.
XMR prices had been moving inside a descending parallel channel since May last year. As a result of the recent downtrend, Monero prices are near the channel’s lower trendline. However, XMR has historically rebounded from the channel’s support.
Bulls might be hoping for a trend reversal as XMR prices reach the channel’s lower trendline. However, investor sentiment continues to be in “extreme fear,” as per the crypto fear and greed index. In addition, the weekly RSI remains below 50, indicating Monero’s momentum is favoring bears.
XMR faces extreme downside risks
XMR prices jumped nearly 13% between intraday low ($134) and high ($152) levels on Friday. However, Monero’s recent price action has caused XMR’s 20-day moving average (20-day MA, red wave) to below its 200-day MA (green wave), creating a bearish pattern called the death cross.
Traders usually consider the pattern an indicator of negative market sentiment.
In addition, momentum oscillator MACD continues to trend downwards for the XMR token. But, negative bars on the MACD histogram have started contracting, indicating the MACD line (difference between 12-day and 26-day EMA) might be moving towards the MACD signal line (9-day EMA of MACD).
The current week’s market rout wiped nearly 49% of XMR’s prices before the token recovered. If Monero fails to continue its uptrend, XMR prices might fall to test support near $138, which has supported XMR prices since Jan 24.
If immediate support fails, XMR prices might fall to support near $127.5, paring all gains made since early Jan 2021. Finally, a market-wide sell-off could force XMR prices to $116 before Monero recovers.’
Oversold RSI, meanwhile
Meanwhile, Monero’s RSI rebounded from oversold regions on Friday after falling below 30 on May 10. In detail, when the RSI goes below 30, an asset enters the oversold region. Traders usually consider an oversold RSI to indicate a bullish trend reversal on the cards.
XMR’s RSI is 33.44 currently on the daily charts. Additionally, the token also broke below the lower trendline of the Bollinger Bands indicator.
Bollinger bands consist of a simple moving average (the middle band) and an upper and lower band. The two bands are standard deviations from the middle band. Therefore, when an asset’s prices break below the lower bands, it denotes an oversold condition.
In addition, the long lower wick on Thursday’s candle indicates bulls are aggressively buying the dips. If bulls continue to push prices upwards, XMR would likely rise to target immediate resistance near $158.
Once XMR moves and consolidates above immediate resistance, Monero prices might next target resistance near $169, supporting XMR’s price action between Feb 6 to Feb 17 earlier this year.
Finally, a sustained uptrend might see XMR rise to $184 before corrections pull back prices.
At the time of writing, XMR was trading at $150, up 9.2% on the day.