A look at LUNA’s price, at press time, indicated that a short-term pullback would be necessary before a massive leg-up. This fact can be supported by technical and on-chain metrics and will serve as an opportunity for sidelined buyers to accumulate LUNA.
A perfect concoction of technicals and on-chain metrics
The altcoin’s price set up a range, extending from $43.34 to $87.92 as it crashed by roughly 50% between 15 and 22 January. After establishing a stable base, LUNA rallied by 74% and pierced the four-hour demand zone, stretching from $75.57 to $79.40. Due to the blockade, the alt’s price set a swing high of $79.52.
Interestingly, between 15 January and 26 February, LUNA set up lower highs while the Relative Strength Index (RSI) created a higher high. This setup is a bearish divergence and forecasts that a retracement is likely. Due to the blockade and the bearish divergence, the resulting price action will be a retracement that drags LUNA down to another stable support level.
The contenders of such a barrier include the 50% retracement level at $65.63 and the 70.5% retracement level at $56.49. Although the crypto might slide lower, the bullish thesis will stay intact as long as the altcoin stays with the formed range.
A reversal at the levels mentioned above will lead to a strong uptrend, one that slices through the said demand zone and tag the range high at $87.92.
Source: LUNA/USDT on TradingView
Here’s the support system
Supporting the short-term retracement is the recent decline in the funding rate of Terra from 0.01% to -0.04%. This sudden dip indicates that investors are booking profits and that the majority of the traders are betting for a retracement.
Source: Santiment
While the short-term outlook might seem bearish, it is an opportunity for sidelined buyers to accumulate since the overall trend is still bullish. Implying a similar outlook for the altcoin is the recent spike in on-chain volume from 881.73 million to 6.14 billion from 19 to 24 February. This massive upsurge has pushed way past the 200-day moving average, indicating that high net worth investors are interested in LUNA at the current price levels.
Source: Santiment
While the situation is looking optimistic for LUNA, market participants need to pay close attention to the ongoing retracement. If this retracement breaks below the 79% retracement level at $52.7, it will reveal that the bulls are weakening. However, a swing low below $43.34 will invalidate the bullish thesis.
