LINK Recovery on the Horizon? Chainlink Price Slides 56% From Yearly High, but Bottom May Be in Sight

Key Takeaways

• The Chainlink (LINK) price decreased since its yearly high in January. It broke down below support in July.
• Chainlink’s (LINK) movement since Nov. 2023 resembles a completed bearish head and shoulders pattern.
• After a 56% decline since the yearly high, is the downward trend finally over, and what’s next if so?

The Chainlink price has fallen since January, accelerating its drop after creating a lower high on May 29. The decline caused a breakdown from a horizontal support area and led to a low of $8.08 on Aug. 5.

However, LINK has shown resilience by bouncing  25% since the low. Given that the low transpired at a confluence of Fibonacci support levels, it raises the possibility that the LINK correction is finally over.

Chainlink Correction Could be Over

The most likely Chainlink wave count shows a textbook five-wave increase succeeded by an A-B-C correction. Waves A to C had an exactly 1:1 ratio, and the correction ended at the 0.786 Fibonacci retracement support level, leaving a long lower wick in place (white icon).

Also, a descending parallel channel marked the top and bottom of the correction with pinpoint accuracy, reinforcing the idea that the bottom is now in place.

If this is the case, the following increase will take LINK’s price to at least $26, a target found by projecting the length of the original upward movement. This is only a conservative target since the price can go much higher if what follows is wave three in a five-wave structure.

However, the $26 target can be considered a temporary stop since it could act as a local top in most future scenarios.

LINK Falls After Rejection From Long-Term Resistance

On the weekly LINK chart, the price has been trending downward since March, following a rejection at the 0.382 Fibonacci retracement resistance level (indicated by the red icon).

While LINK bounced the next month, it created a lower high and a bearish engulfing candlestick in May (red circle). The main horizontal support area is at $13, which has stood since October 2023.

The RSI and MACD are also turning bearish alongside the decline. The indicators are trending downward, and the RSI has generated a bearish divergence (green).

An RSI decline below 50 combined with a price breakdown below $13 will confirm the trend is bearish. In that case, the next support level will be at $9.

The daily Chainlink chart presents a bearish outlook, primarily due to the formation of a bearish head and shoulders pattern that has been unfolding since November. Notably, the pattern features an ascending neckline at approximately $13.

The daily time frame MACD and RSI also suggest a breakdown is likely. The indicators have both broken down from their support trend lines (green), and they are below 0 and 50, respectively.

If the LINK price breaks down, it will confirm the downward movement toward the $9 horizontal support area, as outlined previously.

LINK Wave Count Predicts New Lows

Finally, the wave count aligns with the bearish readings, implying new lows are in store. The most likely wave count suggests LINK has started wave C in an A-B-C corrective structure. The structure comes after a five-wave increase (white) that encompassed the second half of 2023 and continued until March 2024.

Wave C is the final leg of the correction and perfectly aligns with the creation of a bearish Chainlink head and shoulders pattern.

Giving waves A to C a 1:1 ratio leads to a low of $8.20. However, there is intermediate support at $10.50, a level that can also act as the low.

Despite this bearish LINK price prediction, an increase above the B wave high of $19.22 will mean that the trend is bullish instead. At the current time, this seems unlikely.