Avalanche (AVAX) in ‘overbought’ zone after 100% positive aspects in per week — Correction forward?
The Avalanche blockchain platform’s native asset, AVAX, fell on Aug. 19 as merchants determined to safe their earnings from its 100% upside transfer.
The AVAX/USD exchange fee plunged greater than 16% after hitting a three-month excessive of $36.64, placing the brakes on a seven-day upside increase that noticed its value rise by 111%. It seems that merchants felt uneasy about getting into AVAX markets close to $36 due to its historic reference as a sell-off degree, capping AVAX’s earlier restoration makes an attempt from March to May.
AVAX additionally dropped on interim overvaluation fears. The every day relative strength index (RSI) of Avalanche’s token crossed above 70 throughout its upside increase. Essentially, markets take into account an RSI studying above 70 as overbought for the underlying asset, noting that the value has climbed excessively increased and, subsequently, ought to endure a correction.
More proof for AVAX’s interim overvaluation appeared when trying on the Bollinger Bands. The indicator consists of a center band (a 20-period easy transferring common) and two outer bands set at two commonplace deviations under and above the center band.
When the value overreaches its valuation within the quick time period, it tends to leap above the higher band. Similarly, slipping under the decrease band means that the asset is buying and selling under its present valuation. AVAX crossed above the higher Bollinger Band following the newest value rally.
The two indicators have been instrumental in predicting current AVAX value corrections. For occasion, in the course of the February rally the place AVAX surged over 500% in simply two weeks, its RSI and Bollinger Bands each alerted t its extreme interim valuation.
The value wiped off 65% of its positive aspects within the subsequent three weeks to neutralize its overbought standing. Its subsequent interim help got here on the 23.6% Fibonacci line ($22.29) of the Fibonacci retracement graph drawn between the $63.3 swing excessive and $9.62 swing low.
The similar 23.6% Fibonacci degree now serves as the following line of help ought to the value of AVAX appropriate following its RSI and Bollinger Bands alerts.
— Rager (@Rager) August 19, 2021
The newest bout of AVAX’s value increase appeared within the wake of the launch of its $180 million “liquidity mining incentive program” to carry decentralized finance (DeFi) companies to its blockchain platform, together with lending platform Aave and automatic market protocol Curve Finance.
Related: Avalanche Rush to provide out greater than 180M in DeFi incentives
AVAX’s bounce additionally appeared as a rally within the market of its high rival, Ether (ETH), flattened out. This is as a result of merchants are inclined to rotate capital out of overvalued markets to guess on belongings they deem undervalued.
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