With the rising optimism in the crypto market, Avalanche (AVAX) is standing on thin ice. After the recent bearish breakdown, Avalanche is struggling to hold its trading price above the $26 mark.
With an intraday recovery of more than 2%, Avalanche is currently trading at a market value of $27.07. However, a 17.76% drop over the past 7 days has pushed Avalanche’s market cap down to $11.14 billion.
Avalanche Price Trend Breaks Key Support
In the daily chart, the AVAX price trend showcases a downfall, breaking below the local support trendline. This crucial support trendline formed part of a falling wedge pattern with a converging resistance trendline.
Within the pattern, the overall decline has resulted in a 50% drop over the past 55 days, highlighting strong bearish momentum. This trend reflects a high level of selling pressure dominating the market.
Bearish Indicators Strengthen the Downtrend
Supporting the bearish outlook, the DMI (Directional Movement Index) reveals a bearish alignment in the VI lines. Additionally, the rounding reversal in the ADX (Average Directional Index) suggests increasing momentum in the bearish trend.
During this decline, Avalanche broke below the support trendline on Sunday with a 14.15% bearish engulfing candle. This was further confirmed by a 6.70% drop on Tuesday, cementing the bearish trend.
Currently, Avalanche shows an intraday recovery of 2.01%, trading at $27.07. However, the recent downfall has breached the S1 support level at $29.13, indicating further downside potential.
Downside Risks: Key Support Levels to Watch
With the breach of S1, the standard pivot levels suggest the next support zones are at S2 ($23.85) and S3 ($15.90). This projects a potential downside risk of more than 40% if the bearish trend continues.
The inability to hold above the $26 level increases the likelihood of AVAX testing these lower support zones.
Is a Bullish Reversal Possible?
On the flip side, a bullish reversal above the broken trendline could reinstate the uptrend. For this to happen, AVAX must regain key levels, particularly closing above $29.13.
Based on the pivot levels, if the bulls manage to trigger a reversal, the AVAX price could target $30 and $35 in the short term. This would require strong buying pressure to overcome the current bearish dominance.
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