A descending triangle projected further weakening for Axie Infinity as the alt continued to pare off gains after a remarkable run up to an ATH of $155.4. With the 4-hour candles trading below their 20-SMA and 50-SMA, another attack on the bottom trendline of the bearish pattern looked imminent.
A close below the confluence of this baseline and the 38.2% Fibonacci level could lead to another retracement for AXS.
AXS 4-hour Chart
A series of steady lower highs formed the upper trendline of AXS’s descending triangle, while three contact points at the 38.2% Fibonacci level formed the bottom trendline. If bears are able to cut beneath this confluence, AXS would be at risk of an 11% drawdown into the golden Fibonacci Retracement zone.
In order to negate this outcome, bulls would need target a close above the 50-SMA (yellow) and 23.6% Fibonacci level. A breakout in the opposite direction could even translate to a mini rally but a double top at $155 would present bearish threats.
Now according to a few indicators, it was still early to anticipate a breakdown. Some bullish momentum was seeping into the market as per the Awesome Oscillator’s green bars. The MACD also approached a bullish crossover and eyed a comeback above its mid-line.
Finally, the RSI was closer to neutral readings than in bearish territory. If each of these indicators were to stay close to their respective mid-lines, bulls could prolong the breakdown attempt and flush out some selling pressure from the market.
Even though the indicators were amidst a recovery, such signals often turn out to be false in a lingering bearish pattern. Hence, traders must be cautious of a near-term trajectory.
A better call would be to short AXS once the price closes below the 38.2% Fibonacci level. Take-profit can be set slightly above the 50% Fibonacci level while stop-losses can be set above a swing high of $125.8.