Avalanche (AVAX) Prints Classic Reversal Pattern, Delaying Bullish Breakout Signal

Key Takeaways

• A head and shoulders pattern emerged on the weekly chart, with AVAX breaking below the neckline at $20.93.
• AVAX’s social dominance has dropped to 0.22%, showing market interest in the token has faded.
• AVAX broke out of a descending triangle on the daily chart, but a flat EFI shows weak buying pressure.

Contrary to the signs it showed last week, Avalanche (AVAX) struggled to validate its move toward $30. Instead, AVAX price has dropped slightly below the $20 mark, indicating that bullish forces are no longer backing it.

But beyond the impact of bulls, analysis of the daily and weekly timeframes shows that the token might remain stuck. This analysis reveals why this could be the case and the potential price target for AVAX in the near term.

No Relief for Avalanche Yet

One reason the AVAX price failed to extend its breakout is the head-and-shoulders pattern formed on the weekly chart. A head-and-shoulders pattern appears when the price of a cryptocurrency hits a peak (left shoulder), followed by a higher peak (head) and then a lower peak (right shoulder).

When the price breaks below the pattern’s “neckline,” it leads to a downtrend. As shown below, the neckline of the pattern is at $20.93, and the AVAX price has already broken below it.

In addition, the Moving Average Convergence Divergence (MACD) has declined to the negative region. The position in the MACD rating indicates bearish momentum.

Therefore, if the trend remains the same, AVAX price might continue to hit lower values in the short term.

Market Attention Wanes

Furthermore, on-chain data from Santiment shows that AVAX’s social dominance has dropped to 0.22%. Social dominance shows how much conversation across several platforms is focused on one crypto compared to everything else.

While it reflects market attention, it sometimes influences the expected price action. Although spikes in social dominance do not guarantee a price increase, they indicate that a crypto’s value is likely to jump, especially when the price has experienced a correction earlier.

However, a local top could be close if social dominance is high and the price surges exponentially. For AVAX’s price, the decline in the metric indicates that the token is simply out of focus for those looking to buy the dip in the market.

If this remains the same, AVAX price might encounter consolidation or another correction.

AVAX Price Analysis: Potential Bounce Lacks Conviction

Meanwhile, the AVAX/USD daily chart presents a different outlook. According to the chart below, AVAX traded in a descending triangle earlier.

But today, bulls have pushed it above the falling trendline, with the altcoin aiming to hit higher highs. In addition, the Relative Strength Index (RSI) has crossed above the neutral line, indicating bullish momentum.

However, the Elder Force Index (EFI), used to measure the buying and selling pressure level, remains flat. This EFI position indicates that the AVAX price might not get the desired push to reach $30.

If this trend continues, the altcoin’s value might continue consolidating between $16 and $21.

However, if selling pressure increases, AVAX’s price could decline to $14.56. In a highly bullish market condition, the market value could surge toward $30.46 at the 0.382 Fibonacci level.