Avalanche (AVAX), known for its lightning-fast blockchain transactions, is currently navigating a challenging phase in the cryptocurrency market. Trading at $36.72, the AVAX/USDT pair has been showing signs of a bearish trend, compounded by broader market pressures and technical resistance zones. For traders and investors, understanding the key levels and indicators is crucial to anticipating the next move.
Resistance Looms at $40-$42
An analysis of the Volume Profile Visible Range (VPVR) highlights a significant trading activity cluster between $40 and $42. This range represents a critical resistance zone where substantial buy and sell orders have historically taken place. Despite a rally attempt in December, AVAX struggled to break through this barrier, reinforcing bearish sentiment.
On the downside, VPVR data identifies $27 as a strong support level. This zone aligns with a historical accumulation area, suggesting potential buying interest. However, if AVAX breaches this support, it could pave the way for further declines, potentially targeting the $25 range.
Market Participation Declines
Recent data indicates a noticeable decline in Open Interest (OI), coinciding with AVAX’s inability to sustain momentum above $55 in November. A reduction in OI often signals waning speculative interest, as traders exit positions amid uncertainty.
A falling OI during a price correction can indicate that long positions are being closed, reflecting diminished confidence in a short-term recovery. To shift this sentiment, AVAX needs a decisive move above the $40-$42 resistance zone, coupled with a rise in OI. Without these, bearish momentum is likely to persist, with the $27 support level becoming a focal point.
Oversold or More Room for Declines?
On the daily chart, AVAX’s Relative Strength Index (RSI) is hovering around 35, signaling ongoing bearish momentum. An RSI below the neutral 50-level suggests weakening buying pressure, which aligns with the token’s lower highs and lower lows pattern.
If the RSI dips below 30, it could indicate an oversold condition, potentially attracting bargain hunters and drives a short-term recovery. However, without a decisive climb above 45, bearish momentum is likely to remain dominant. For bulls to regain control, the RSI would need to surpass 50, signaling a breakout above key resistance zones like $42.
Sentiment Signals Bearish Bias
Market sentiment further reflects bearish bias, with an increasing number of short positions relative to longs in the AVAX/USDT market. This trend aligns with the rejection at the $40-$42 resistance zone, suggesting traders are positioning for further downside.
However, extreme imbalances in the Long/Shorts Ratio can sometimes act as contrarian signals. If short positions become overly dominant, a short squeeze could occur, leading to a sharp price spike.
For a sustained bullish shift, the Long/Shorts Ratio would need to stabilize or lean towards long positions, indicating renewed trader confidence. Until then, the growing short interest supports the bearish outlook, keeping AVAX under pressure.
What’s Next for AVAX?
For AVAX to reverse its current trajectory, several factors must align:
- Breaking Resistance: A sustained move above $42 is crucial to shifting market sentiment.
- Rising Open Interest: Increasing OI would signal renewed speculative interest.
- Improved RSI: A climb above 50 on the RSI could indicate strengthening bullish momentum.
- Sentiment Shift: A stabilization or increase in long positions could reflect growing confidence in a recovery.
Until these conditions are met, AVAX’s price action is likely to remain bearish, with traders keeping a close eye on the $27 support level for signs of further downside or a potential rebound.
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