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Analysis

Chainlink: Traders can long here to bag 24% gains

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Source: Pixabay

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

The previous week was quite bullish for Chainlink. The alt snapped a near 30% hike in value and registered a fresh local high on the charts. The market, at press time, seemed to be easing at slightly lower levels and a potentially bullish pattern was taking shape.

Also, traders were in with an opportunity to long LINK at a few levels to capitalize on the projected breakout. At the time of writing, LINK was trading at $30.42, up by 2% over the last 24 hours.

Chainlink 4-hour Chart

Source: LINK/USD, TradingView

The range between $24-$24.7 has been under scrutiny since early August but Chainlink continued to hold firm. When this zone was tested once again by sellers on 30 August, a strong market rally ensued. This pushed LINK to a 3-month high of $31.78. From this point, a correction towards the 20-SMA or 38.2% Fibonacci level would give rise to a bull flag pattern. A successful breakout would allow LINK to set its course at 26 May’s swing high of $35.4.

To achieve this outcome, LINK would need to crunch incoming losses between $30.5 and $28.5. Any move below this point would leave the market exposed to short-sellers. Moreover, the 50% Fibonacci level also posed some threats and could halt LINK’s projected upswing.

Reasoning 

The Relative Strength Index was in stabilization mode after hitting overbought territory. This paved the way for another upwards push without the danger of an immediate reversal. Even though the Directional Movement Index’s +DI and -DI converged slightly, buyers seemed to still dictate price movement.

Finally, the MACD pictured a bearish crossover. However, this is normal during a correctional phase. A favorable outcome can be expected as long as the MACD holds above its half-line.

Conclusion 

LINK can be expected to contain losses between $30.5 and $28.5 over the coming sessions. A resulting bull flag pattern has the potential to kickstart another rally towards $35.4. Traders can place buy orders within the aforementioned zones and exit their positions once LINK touches its target.

This move would bag gains of 24.5% from the 38.2% Fibonacci level.

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A business graduate with a keen interest in emerging markets across South East Asia. As a financial journalist, he covered stocks and market reports across Australia and New Zealand as well.