Avalanche (AVAX) is facing the risk of breaking its 938-day horizontal support, which could lead to a substantial 50% price drop.
Both the weekly and daily technical analyses point to bearish sentiment, with indicators like the descending resistance line and declining RSI signalling potential price weaknesses.
While a strong bounce at the $11.50 support level could drive a 25% price increase, the prevailing signals suggest a more likely scenario of a breakdown, possibly leading to a 50% drop towards $6.
The Avalanche (AVAX) has entered a precarious position, as it risks breaking down from a significant long-term horizontal support area that has remained unbroken for an astonishing 938 days. Should this support falter, it could trigger a substantial bearish scenario, potentially leading to a 50% price plunge.
Descending Resistance Line and Recent Support Bounces
The recent price trajectory of AVAX paints a worrisome picture. After reaching its all-time high of $147 in November 2021, the price has been constrained by a descending resistance line. This line was last encountered in March 2022, denoted by a red icon on the chart.
During its downward trajectory, the AVAX price found temporary solace at the $11.50 horizontal support level on two separate occasions: once in January and again in June of 2023, as indicated by green icons. The second bounce witnessed a substantial lower wick, indicating potential buying pressure. Notably, the $11.50 support level has remained intact for an impressive duration of 938 days.
Stalled Momentum and Bearish Signals
Despite occasional support, AVAX has struggled to gain meaningful upward momentum. Rather than staging a recovery, the price has continued its descent and currently hovers slightly above the critical $11.50 support level. The situation is exacerbated by the price’s considerable distance from the descending resistance line, now situated at $20.
Even the deployment of Uniswap V3 on the Avalanche network has failed to rejuvenate the price. A look at the weekly Relative Strength Index (RSI) – a tool used by traders to gauge momentum – reveals a bearish reading. Traditionally, an RSI above 50 in an upward trend suggests bullish strength, while an RSI below 50 signifies the opposite. Presently, the RSI is in a declining trend below 50, indicating a bearish sentiment.
Daily Timeframe Echoes Bearish Sentiment
Zooming in on the daily timeframe, the technical analysis reinforces the bearish outlook. A key reason for this is the rejection (denoted by a red icon) at the $14.50 horizontal area, followed by a subsequent price decline. This rejection transpired post a breakout from a short-term descending resistance line, raising concerns about the authenticity of the breakout.
The price’s inability to reclaim the $14.50 area following the breakout serves as another bearish indicator. Furthermore, the daily RSI is below 50 and diminishing, echoing the overarching bearish sentiment.
Potential Price Scenarios: A Breakdown and Its Consequences
Considering the collective signals and trends, the scenario of a breakdown from the long-standing $11.50 horizontal support zone emerges as the most plausible outcome. A 50% drop to the subsequent support level at $6 is a conceivable future price projection in this event.
However, it’s essential to acknowledge the potential for price resilience. A robust bounce at the $11.50 horizontal support zone could potentially pave the way for a 25% surge towards the next resistance at $14.50.
As the Avalanche (AVAX) price navigates its critical juncture, the risk of a substantial drop cannot be dismissed. The prolonged horizontal support’s vulnerability, combined with various bearish indicators, underscores AVAX’s current challenges. Market observers and participants will keenly monitor whether AVAX can defy the bearish predictions and stage a recovery or if it succumbs to the downward pressures, potentially leading to a significant price decline.
Sheikh is a co-founder and key member of the Wiki Crypto team, known for his expertise in macroeconomics, monetary policy, and fundamental analysis of both traditional and cryptocurrency assets. He is also well-versed in the future of blockchain technology and the current state of cryptocurrency regulation in Eastern Europe and the Middle East. In addition, Sheikh has a background in online news media and Digital Marketing and is skilled in building a multi-language crypto news outlet with a global reputation.