Avalanche ‘bull trap’ risks pushing AVAX price down by 30% in February

Bulls Avalanche (AVAX) should brace themselves for impact led by the growing divergence between several key indicators on the daily time frame charts.

The AVAX price chart depicts a bearish divergence

The daily AVAX chart shows a classic bearish divergence between price and the relative strength index (RSI), the momentum oscillator formed since January 11.

In other words, the price of AVAX has gone higher since that date. However, on the other hand, the coin’s daily RSI has formed lower highs. This divergence indicates a slowdown in the momentum of the AVAX/USD pair, which may lead to a price reversal.

Moreover, the reduced volume during AVAX’s ongoing uptrend also hints at similar bearish cues.

Price-RSI and price-volume divergences emerged as AVAX price continued its 2023 uptrend. Notably, Avalanche has increased more than 100% year-to-date to $22.50 on Feb. 2, helped by improving risk sentiment and news of its partnership with Amazon.

On January 31, Avalanche partnered with Intain, a structured financial platform that facilitates over $5.5 billion in assets across more than 25 transactions to run the IntainMARKETS digital marketplace through the IntainMARKETS Subnet.

AVAX’s price is up almost 20% after the announcement.

Avalanche price risk fell 30% in February

Price AVAX has managed to close above two key resistance levels: the multi-month descending trend line (blackened out) and the 200-day exponential moving average (200-day EMA; blue wave) during the ongoing rally.

Avalanche is now eyeing a break above $22.75, which has served as resistance since August 2022, for a potential break to $30 as its next upside target. This level also coincides with the target of the falling wedge breakout discussed in this analysis.

In other words, a profit of about 30% over the current price level.

Conversely, a pullback from the resistance level, triggered by the bearish divergence indicator discussed above, could send AVAX price towards the 50 day EMA (red wave) around $15-$16, down around 30% from the current price.

This article does not contain investment advice or recommendations. Every investment and trading step involves risk, and readers should do their own research when making their decisions.