- Chainlink (LINK) is experiencing bearish momentum, with conflicting signals from the CMF and RSI suggesting potential short-term losses.
- However, a key support zone at $12.33 could trigger a bullish reversal if defended by the bulls.
Chainlink (LINK) has been on a rollercoaster ride from May to July, predominantly in a bearish trend. However, signs of a potential reversal are emerging, suggesting that a trend shift might be on the horizon despite the current bearish sentiment.
Bearish Momentum and Market Structure Break
For the majority of the summer, Chainlink has been grappling with bearish pressure. The price experienced a notable drop, reaching lows of $11.07 in early July. This bearish trend was briefly interrupted on July 21st when LINK surged past $14.75, indicating a market structure break on the 1-day timeframe. This upward movement was short-lived as the gains made in mid-July were quickly erased in the following week.
Conflicting Indicators: CMF and RSI
Analyzing the momentum and volume indicators reveals a mixed picture for LINK. The Chaikin Money Flow (CMF) indicator remained above +0.05, suggesting significant buying pressure despite the recent price decline. On the other hand, the Relative Strength Index (RSI) fell below the neutral 50 mark, indicating a shift towards bearish momentum. This divergence between the CMF and RSI points to conflicting signals in the market.
Key Support Zone and Potential Reversal
Since April, Chainlink has been trading within a range of $12.73 to $18.68. The recent bearish sentiment in July led to a price drop to $11.07, with a brief period of trading around $12.33. This $12.33 level is now a crucial support zone that could potentially trigger a reversal. If the bulls manage to defend this support level, we might see a recovery in LINK’s price over the next week.
Open Interest and Spot CVD Analysis
In the past three days, LINK’s price has gradually declined, accompanied by a decrease in Open Interest (OI) from $152 million to $143.7 million. This simultaneous drop in OI and price indicates a bearish sentiment among futures traders. Additionally, the spot Cumulative Volume Delta (CVD) is trending downward, highlighting weak demand and further reinforcing the bearish outlook in the short term.
Caution Advised for Bulls
While there are indications of potential buying pressure and a possible trend shift, caution is warranted for bulls in the coming days. The conflicting signals from momentum and volume indicators suggest that LINK could experience more losses before any substantial recovery. Traders should keep a close eye on the $12.33 support zone, as a bounce from this level could signal the beginning of a bullish reversal.
