Polygon (POL) Breaks Key Resistance After 20% Bounce — Extended Rally Uncertain

Key Takeaways

• Polygon’s native token has climbed from $0.15 to $0.19 after breaking out of a falling wedge pattern.
• Key indicators like the RSI and CMF suggest weak bullish momentum and limited capital inflow.
• Unless momentum improves, POL could continue consolidating between $0.16 and $0.20.

POL, the native token powering Polygon’s layer-2 scaling solution, has rebounded 20% from its all-time low. On April 7, the asset, formerly known as MATIC, plunged to a record low of $0.15.

Since then, Polygon’s price has climbed to $0.19, breaking past a crucial resistance level. However, despite the rally, several indicators suggest that the upswing might struggle, and a sustainable breakout is far from guaranteed.

In this analysis, CCN reveals the key drivers behind the price movement and outlines what could lie ahead for the token.

Polygon Breakout Lacks Volume

Polygon’s price has fallen by 60% year-to-date (YTD). The token hit a yearly high of $0.53 in January.

Months later, the price has declined to $0.15, leading to a falling wedge. A falling wedge features two converging trendlines, with the upper one hitting lower highs while the lower one represents lower lows.

In summary, the falling wedge is a bullish pattern that indicates a potential trend reversal or continuation to the upside. On the POL/USD daily chart, the cryptocurrency has broken above the upper trendline.

The same upper trendline aligned closely with resistance at $0.18. Under normal conditions, a breakout above this level would validate a bullish thesis, suggesting that Polygon’s price could continue climbing.

However, the Chaikin Money Flow (CMF), a key indicator measuring buying and selling pressure, paints a different picture. From the chart below, the CMF remains in negative territory, indicating that capital inflow into POL is still weak.

The Relative Strength Index (RSI), which measures momentum, also supports this thesis. At press time, the RSI reading remains below the neutral 50.00 rating, suggesting that bullish momentum is yet to take hold.

If this trend persists, POL’s price might continue to consolidate within a narrow range, likely moving between $0.16 and $0.20.

Resistance Zone Spotted

From an on-chain perspective, the Global In/Out of Money (GIOM) shows that the Polygon ecosystem token could face another resistance between $0.19 and $0.46.

GIOM breaks down all holders of a token based on the average price at which they acquired their tokens. With the metric, one can spot support where a higher volume is profitable (green cluster) and resistance where a higher volume is unrealized losses (red cluster).

Based on IntoTheBlock data, over 58,000 Polygon addresses are holding 8.54 billion POL tokens in unrealized losses, accumulated between the $0.19 and $0.46 range. This cluster could trigger increased sell-offs as holders might attempt to break even.

Such selling pressure may act as a barrier to a sustained rally, making it difficult for POL’s price to climb meaningfully in the short term.

POL Price Analysis: Consolidation May Follow

In terms of the potential short-term targets, the red line of the Supertrend indicator is above Polygon’s price, and positioned near $0.20.

Typically, when the green line of the indicator is below the price, it represents a buy signal, and the price can increase. But since it is the other way around, it is a sell signal, and POL could find it challenging to trade higher than $0.20 anytime soon.

Instead, the next move for the cryptocurrency could be consolidation, with the price moving between $0.16 and $0.20.

However, in a highly bullish scenario, the Polygon ecosystem token could rally to $0.30 near the 0.236 Fibonacci level. For this to happen, the CMF and RSI reading has to rise above the signal lines.

Alternatively, if selling pressure increases, this trend might change. In that scenario, POL could drop below the lower trendline of the wedge mentioned above. Should that be the case, POL’s price could slide to a new all-time low.