This key buying and selling sample hints on the continuation of Fantom’s (FTM) 125% rebound
Fantom (FTM) appears to be like poised to hit a brand new file excessive within the coming classes after its 125% value rebound from $1.23 on Dec. 14, 2021, to $2.84 on Jan. 3, 2022 triggered a basic bullish reversal setup.
Dubbed inverse head and shoulders (IH&S), the setup seems when an asset varieties three troughs under a so-called neckline resistance, with the center trough (the top) deeper than the left and proper shoulder.
The value of FTM has not too long ago undergone an analogous value trajectory, as proven within the chart under. As a consequence, FTM has a typical resistance within the vary outlined by $2.55 to $2.74, which encompasses the size of the inverse head and shoulders sample.
Could Fantom rally by one other 50%?
In an ideal world, an IH&S sample would usually lead to a bullish breakout as soon as the value closes decisively above the neckline stage. Ideally, the upside goal be equal to the utmost distance between the top and the neckline, when measured from the breakout level.
On Monday, FTM nearly accomplished its IH&S formation by reaching its neckline. As a consequence, the Fantom token’s subsequent transfer could possibly be a bullish breakout above the $2.55 to $2.74 resistance vary. In doing so, it could pursue a run-up towards $4.33, based mostly on the setup offered within the chart under.
A pointy value pullback from the neckline vary, accompanied by a spike in quantity, would threat invalidating the IH&S setup. In that case, the subsequent ideally suited assist line might come close to $2.08. This could be based mostly on FTM’s quantity profile seen vary (VPVR), a metric that shows buying and selling exercise over a specified interval at specified value ranges.
Are there dangers of overvaluation?
Downside dangers within the Fantom market additionally appeared within the type of its relative energy index (RSI), a metric that measures the magnitude of the asset’s latest value modifications to guage its overbought or oversold situations.
In element, FTM’s day by day RSI entered an overbought territory on Jan. 3 as its studying marginally jumped above 70. The technical indicator suggests FTM is overbought and that it ought to bear a sure diploma of correction to neutralize its market sentiment.
In layman’s phrases, an RSI studying above 70 is normally seen as a sign to promote. However, the sell-offs sometimes don’t essentially come proper after RSI jumps into the overbought zone.
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Based on a number of RSI corrections noticed between August and September 2021, the FTM value seems to increase its upside momentum even after the indicator crosses above 70. At its finest, the day by day RSI had reached nearly 89 on Sep. 9, coinciding with the FTM value hitting the then-record excessive of $1.99.
That considerably leaves FTM with the opportunity of pursuing its IH&S revenue goal of $4.33 regardless of its overvaluation dangers. What might comply with is a correction in direction of its 20-day exponential transferring common (20-day EMA; the inexperienced wave within the chart above) round $2.09.
This would deliver the value close to to the VPVR assist at $2.08, as mentioned above.
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