The decentralized oracle network ChainLink and its native token, LINK, have staged a price recovery amid the broader cryptocurrency market’s bounce from a recent significant correction.
Despite experiencing a 16% price retracement over the past month, LINK has regained its stronghold, rising 5% to $13 in the past 24 hours after hitting a six-month low of $11 on Friday. Still, cautionary signals have emerged that caught the attention of crypto expert Ali Martinez.
Bearish Signals For ChainLink
In a recent social media post, Martinez raised concerns about a pattern visible on LINK’s daily chart, suggesting the potential for a substantial price correction ahead.
Specifically, the analyst highlighted a possible retest of the neckline of the head-and-shoulders pattern during the recent upswing to $13.
According to Martinez, this pattern indicates a continuation of the downtrend until the right shoulder is broken, meaning that the ChainLink price would have to break above the $20 level, the top of the right shoulder, to invalidate this scenario.
If this scenario is as predicted, ChainLink could face a 45% correction. Martinez previously highlighted the likelihood of such a correction if LINK were to break below the $12.70 support level.
The token’s price might retrace significantly in this bearish scenario, potentially reaching as low as $6.60. Notably, these levels were last witnessed in September 2023, before the commencement of the overall market uptrend that began in November of the same year.
Key Levels For LINK’s Price Recovery
Another analyst, Crypto Ambrosio, presents similar downward scenarios for the ChainLink price in a recent analysis of key indicators.
The analyst suggests that if the 20-week exponential moving average (EMA), depicted by the yellow line in the chart above, remains above the current price action, it would serve as a notable bearish signal for the token. However, breaking above this indicator situated at $14.75 would invalidate this bearish outlook.
Additionally, Crypto Ambrosio noted a downtrend pattern in the Relative Strength Index (RSI), further supporting the notion of a new downtrend for ChainLink. To counter these bearish signals, it is crucial for LINK to hold the $12 support level, as noted by the analyst.
Ambrosio also believes that if ChainLink forms a Falling Wedge pattern and breaks the resistance at $15, it could signal a bullish reversal and pave the way for further price recoveries toward its yearly high of $22.89, reached in March.
The token must overcome key upper resistance levels while trading at $13.28 to initiate a potential price recovery. Upon analyzing the LINK/USD daily chart, the token will likely encounter its first significant challenge at the $13.52 price level, which has acted as a resistance for the past two months.
Moreover, to invalidate the extension of the bearish scenario and surpass the 20-week exponential average, the ChainLink price would need to surpass and consolidate above the $14.38 resistance level.
Featured image from DALL-E, chart from TradingView.com