Why Optimism traders should wait to short OP

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

• Selling pressure took OP to critical support level.
• Negative funding rate could aid bears in the short term.

Selling pressure on Optimism [OP] could see bears flip the $1.165 support level to resistance in the short term. The rejection of the bullish rally at the $1.419 resistance level on 2 October ushered in a wave of sustained bearish momentum that has seen Optimism drop by 18.9% between 2 October and 13 October.

Read Optimism’s [OP] Price Prediction 2023-24

With Bitcoin [BTC] trading at sub-$27k prices, sellers could take advantage to break the bullish defense at the key support level.

Could this be the end of bullish defense of $1.165 support?

Source: OP/USDT on Trading View

A look southward showed that the $1.165 support level has been vital for bulls. Notable bullish rallies have occurred from the support level in June and July 2023. Despite Optimism’s recent bearish structure, the level has held firm to stem the bearish slide.

However, the latest price action on OP’s price chart highlighted a weakening of the bullish defense.

The 12H timeframe showed that OP had posted three successive bearish candles over the past 48 hours. This was reflected in the Relative Strength Index (RSI) crashing below the neutral 50 and hovering just above the oversold zone, as of press time.

Furthermore, the On Balance Volume (OBV) dipped slightly, although it was still on a good uptrend.

A break of the support level would offer new shorting opportunities for sellers with a target of $1.042. However, another successful defense of the level and BTC returning to $27k could see OP bulls rally again.

Negative funding rates showed shorts were in the majority

Source: Coinalyze

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

Negative funding rates suggest that most of the futures market was short and willing to pay funding to bears for their exposure. Also, data from Coinalyze showed that the Open Interest dipped along with price on the four-hour timeframe.

Therefore, traders can wait for a break of the support level before adding more short positions in the short term.