RUNE could be due for a heavy retracement thanks to this top reversal setup
RUNE’s price has formed a top reversal pattern on the 2-day chart and it further hints at a massive correction. If investors continue to book profit or Bitcoin takes a U-turn, there is a good chance Thorchain will trigger a downtrend.
A bearish outlook for RUNE price
RUNE price has rallied 286% in the last month and shows retesting the $12.51 hurdle for the third time. The last two moves into this barrier led to massive rejections followed by steep corrections.
Since 23 August 2021, Thorchain has tagged this level thrice with the second retest deviating above the range high at $12.51. The most recent and the third revisit of this ceiling completes a triple tap setup.
This technical formation is a top reversal pattern and forecasts a trend favoring the bears. Considering the overextended run-up for RUNE price, there is a good chance this move will retrace lower.
The immediate support level at $7.76 or the 50% retracement level is the only logical foothold that will support the sell-off by absorbing the bearish momentum. Therefore, investors can expect RUNE price to crash by 33% from its current position.
Supporting this move to the downside is the recent collapse in the 7-day moving average for on-chain volume from 492 million to 235 million. This development represents that more investors are booking profits and are likely leaving the network.
To make matters worse, the hype around RUNE also seems to be dropping quickly. The 7-day moving average for social volume has also deteriorated from 13.14 to 4.29. All in all, the investor sentiment seems to be nosediving, further adding credence to the bearish outlook detailed from a technical standpoint.
Regardless of the bearish outlook seen for RUNE price from a technical standpoint, the overall market is in a bullish phase. Therefore, a downswing seems unlikely at this level. If RUNE price produces a two-day candlestick close above 3 November 2021, swing high at $17.30, the bearish thesis and the triple tap setup will face invalidation.
In such a case, RUNE price could make a run for the all-time high at $21.33 and even set up a new one at $25 in a highly bullish case.