Optimism [OP] is up 20% – Are more gains likely?

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

• OP posted over 20% gains in the past 24 hours at the time of writing 
• More shorts positions liquidated on the lower and higher timeframes 

Optimism [OP] is poised to reverse all losses seen in early June if its press time trajectory continues. The native token of the Layer 2 roll-up surged over 20% in the past 24 hours, rising from $1.12 to $1.4. 

Is your portfolio green? Check out the OP Profit Calculator 

The upswing followed Bitcoin’s [BTC] surprise foray into the $29k zone despite the overhung of the Coinbase and Binance lawsuits. If the bullish sentiment persists and BTC holds its ground, OP could offer extra gains. 

Can bulls push forward?

In late May/early June, OP traded sideways within the $1.35 – $1.54 range (orange). But it breached the range and dropped lower on 10 June after BTC retested $24k. After that, it entered another narrow consolidation range of $1.07 – $1.18 (white). 

BTC’s surge to $29k tipped OP to inflict a bullish breakout from narrow range formation. At press time, price action has retested and broke above the previous range-low of $1.35. 

However, a price rejection was likely from the mid-range of $1.44 if bulls cooled from the rally. A pullback retest on the range-low of $1.35 could offer new buying opportunities, targeting the mid-range ($1.44) and the previous range-high of $1.54. 

A drop below the range-low ($1.35) and subsequent close below $1.27 will invalidate the bullish thesis. Such a drop could see sellers fight for control and likely devalue OP to $1.18. 

In the meantime, the Relative Strength Index (RSI) hit the overbought zone. Additionally, the On-Balance Volume (OBV) registered a sharp spike, highlighting extreme buying pressure and demand, respectively. 

Short positions discouraged

The liquidation metric indicated a strong bullish sentiment and favored bulls on the futures market front. Furthermore, over $150k worth of short positions have been wrecked on the four-hour timeframe. 

How much are 1,10,100 OPs worth today?

Extrapolated to the daily timeframe, over $2.4 million in short positions were liquidated, while longs suffered less than $300k in the same period. Hence, the bullish sentiment could persist unless BTC encounters pullbacks.