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Analysis

Buying AVAX could be risky in the next few days- Here’s why

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Avalanche falls 13% within a day but the $18.7 support has held, so far
Source: Pixabay

Disclaimer: The findings of the following analysis are the sole opinions of the writer and should not be considered investment advice.

The previous trading day saw heavy losses across the board for both equities and crypto. Bitcoin [BTC] posted a 12% decline, and the S&P 500 also saw a 4.3% drop.

This occurred on the back of fears that the Federal Reserve would likely raise interest rates in an attempt to combat the rising inflation.

Avalanche [AVAX] was unable to scale the $21.86 heights in recent days. Going forward, it appeared likely that further downside could be in store over the next week or two.

AVAX- 1-Hour Chart

Avalanche falls 13% within a day but the $18.7 support has held, so far

Source: AVAX/USDT on TradingView

Avalanche faced significant selling pressure in recent hours. The $20.5 area, which had been a zone of consolidation a few days back, did not give a noticeable reaction at all on the one-hour chart. AVAX crashed right through it and needed to sink to the $18.72 level to find a positive reaction.

At the time of writing, the bounce from the $18.72 mark was in progress. However, it was likely to face resistance at the $19.4-$19.5 zone. Earlier in September the $19.5 belt had acted as resistance and was highlighted as a significant short-term area.

The cyan box marked on the chart highlighted a bearish order block from late August. Because of the dip to $18.7, it was likely that the $19.5 territory will be seen as a supply zone. Hence, traders can look for selling opportunities in the short term.

Rationale

Avalanche falls 13% within a day but the $18.7 support has held, so far

Source: AVAX/USDT on TradingView

The near-term momentum was strongly bearish. The Relative Strength Index (RSI) dropped to 25 and bounced slightly to reach 35 at press time. Until the RSI can climb back above neutral 50, the short-term momentum would be bearish according to the RSI.

The Stochastic RSI neared the overbought territory, and could soon form a bearish crossover. While the Stochastic RSI by itself has a low success rate, the confluence of bearish RSI and $19.5 resistance meant AVAX could see further losses soon.

The Accumulation/Distribution (A/D) line was near its lowest level in September and highlighted heavy selling volume in recent hours.

Conclusion

The intense selling meant that buying AVAX could be risky in the next few days. Rather, a selling AVAX near the $19.5-$19.6 resistance would be trading with the trend.

Yet, Avalanche has bounced between $17.9 and $21.8 in recent weeks. A further drop the $17.9 could see a hefty bounce.

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Akashnath is a Chemical Engineering graduate deeply fascinated by Technical Analysis and the crypto markets and enjoys studying price movements and trying to find patterns.

Disclaimer: AMBCrypto's content is meant to be informational in nature and should not be interpreted as investment advice. Trading, buying or selling cryptocurrencies should be considered a high-risk investment and every reader is advised to do their own research before making any decisions.