ARB traders can see a bearish outlook despite recent gains. Here’s why…

Disclaimer: The information presented does not constitute financial, investment, trading, or other types of advice and is solely the writer’s opinion.

• Arbitrum has a higher timeframe bearish bias and short sellers could get an opportunity soon
• The local highs from the daily chart could see a retest this week, but can the bulls push past them?

Arbitrum [ARB] bulls saw some success in the past week. The trend has been overwhelmingly bearish since late August, but things began to take a turn for the better on 12 September. However, the price chart showed that the short-term gains could be erased as ARB approached a strong resistance region.

Read Arbitrum’s [ARB] Price Prediction 2023-24

Apart from the prices, the Arbitrum tokenomics has been a talking point. It is another factor that traders and especially long-term investors should be aware of. Over the next week, here’s why the bullish impetus could get stalled.

The Fibonacci retracement levels and liquidity pockets to the north are worth watching

Source: ARB/USDT on TradingView

Based on the drop from $0.923 to $0.739 that began on 8 September, a set of Fibonacci retracement levels (pale yellow) was plotted. It showed the 61.8% and 78.6% levels at $0.853 and $0.884, marking them as levels where a bearish reversal could occur.

The market structure of ARB on the one-day chart was bearish, though it was bullish on the H4 chart. Similarly, the Relative Strength Index (RSI) noted strong upward momentum in recent days. Furthermore, the Chaikin Money Flow (CMF) also spiked higher to indicate notable capital inflow to the Arbitrum market.

Yet, the On-Balance Volume (OBV) stayed obstinately flat over the past ten days even as the prices rallied higher, suggesting a lack of demand behind the move. Hence, short sellers can wait and watch the token’s reaction from the $0.88-$0.9 region.

Could the liquidity pockets just above $0.9 attract ARB to it?

Source: Coinalyze

Data from Coinalyze highlighted bearish sentiment in the short term. The Open Interest (OI) slid lower over the past 24 hours as Arbitrum noted a dip from $0.87 to $0.836, which was a sign of discouraged bulls. The spot Cumulative Volume Delta (CVD) also trended downward since 16 September to underline selling pressure in the spot markets.

Source: MobChart

The chart above showed large sell orders in the area from $0.84-$0.912 which amounted to just over $1 million. Moreover, the $0.91-$0.93 zone was important as it was close to the previous lower high on the daily timeframe.

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Therefore, it was also possible that the current bounce could extend as high as $0.92 before the bulls get exhausted and the bears can seize control again. To the south, a bearish target would be the lows at $0.739 and the 23.6% Fibonacci extension level at $0.6955.