- Avalanche price has dropped 5% to $88 as more losses are in the offing.
- The correction was quick and sharp and bulls attempt to push the price above the flag.
- A bullish breakout would see AVAX rise above $100 as price discovery continues.
Avalanche price has been attempting recovery following a correction that threatens to undo all the gains made since the beginning of November. AVAX has rallied approximately 33% from a low of $72.49 on November 06 to hit a new all-time high around $97.04 on November 08. This rally took the Relative Strength Index (RSI) indicator into the overbought zone at 80.09 which triggered a correction amid massive profit-taking.
Avalanche price action Forms A Bearish Flag
AVAX price is hovering around $87.84 with a bullish bias at the time writing on most cryptocurrency exchanges and appears to have formed a bearish flag on the four-hour chart. The upward trendline between November 06 and November 08 forms the flag post while the short price correction forms a descending parallel channel which forms the flag.
Note that if AVAX does not breakout from the flag, it will continue the correction and the asset may drop to tag towards the beginning of the flag post at $72. This pessimistic outlook will be validated if Avalanche price drops below the current support at $87.54 and slips to seek support from the $85 level embraced by the middle boundary of the flag. A further drop could see AVAX slide further to tag the 50-day Simple Moving Average (SMA) at $83.33 or the lower boundary of the flag at $81.69.
AVAX/USD Four-Hour Chart
Even though many would use US inflation numbers to validate this bearish outlook, it is important to that the technical indicators also accentuate this narrative. For example, the RSI showed that Avalanche was recently massively overbought triggering the correction. However, the quick reversal means that AVAX bulls won’t go quietly without a fight.
Therefore, if bulls manage to push the Avalanche price above the immediate resistance at $89.15 embraced by the upper boundary of the flag, the bulls will be bolstered to push AVAX higher.
However, a decisive bullish breakout will be realised in Avalanche overcomes the recently discovered major resistance around $93.53. If this happens, the asset will re-test the $97.04 ATH with bulls eyeing areas above $100 as AVAX’s price discovery continues.
Therefore, traders should expect difficult hurdles on this stretch of the upward movement, if it is to take place. However, Avalanche will need support from the wider market and positive market sentiments to resume the uptrend.
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