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XRP Rally Turns Into a Bull Trap, Potential Drop Below $3 Looms

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Victor Olanrewaju
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Key Takeaways

  • After hitting $3.31, XRP’s price is about to fall below the upper trendline of the bull flag pattern.
  • Indicators like the MACD show bearish momentum and validate the potential of an XRP price correction.
  • The MFI reveals waning buying pressure, indicating that the altcoin could drop below the 0.618 Fib level.

XRP’s rally may have hit a roadblock after what appeared to be a sustained uptrend toward $4 seems to have fizzled. On Jan. 13, XRP’s price was $2.35.

As of this writing, it trades at $3.25. This indicates that the cryptocurrency’s value has increased by 35% within the last seven days. Previously, this price increase showed signs that it was ready to climb above the all-time high it reached in 2018.

While that is still possible, this analysis reveals that the recent hike may have led XRP’s price into a false breakout. As such, the price might experience a notable pullback before it goes higher.

XRP Bull Flag Nears Invalidation

According to the 4-hour chart, XRP formed a bull flag between Jan. 13 and 19. A bull flag is a bullish pattern characterized by two rallies separated by a brief consolidation period.

The pattern forms when a sharp, almost vertical price spike creates the “flagpole,” followed by a pullback with parallel upper and lower trendlines that form the “flag.” The flag typically indicates a continuation of the uptrend once the price breaks out above the upper trendline.

As seen below, XRP sustained the rally after breaking out of the upper trendline, which led to the price jumping to $3.31 earlier today.

But as of this writing, the altcoin’s price is on the verge of dropping below the trendline, signifying that the previous breakout was a bull trap.

A bull trap is a temporary reversal that hints at a sustained uptrend. This creates a false sense of optimism, prompting long positions. However, once the price starts to drop again, the decline extends.

XRP price analysis
XRP/USD 4-Hour Chart | Credit: TradingView 

A further assessment of the 4-hour chart shows that the Moving Average Convergence Divergence (MACD) has dropped to the negative zone. The drop in the MACD reading indicates bearish momentum and validated the bull trap thesis.

If the momentum stays bearish, the XRP rally could be completely negated, and the price could fall below $3.

XRP Price Prediction: No $4 Without Correction?

Analysis of the daily chart also suggests a similar outlook. On the mentioned timeframe, the Money Flow Index (MFI) has dropped from its peak on Jan. 17.

The decline in the MFI reading indicates that the buying pressure around XRP is no longer at the height it was last Friday. Hence, the altcoin’s value might be subject to a price decline.

In that case, the XRP price is likely to fall to $2.29 at the 0.618 Fibonacci retracement level. If selling pressure intensifies, it could drop below $2 to the 0.382 Fibonacci level at $1.60.

XRP price analysis suggest decline
XRP/USD Daily Chart | Credit: TradingView 

However, if the token rises above the upper trendline of the bull flag pattern, this correction might not happen.

In that case, the XRP price could climb to a new all-time high and surpass $4.

Disclaimer: The information provided in this article is for informational purposes only. It is not intended to be, nor should it be construed as, financial advice. We do not make any warranties regarding the completeness, reliability, or accuracy of this information. All investments involve risk, and past performance does not guarantee future results. We recommend consulting a financial advisor before making any investment decisions.
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Victor Olanrewaju

Victor is a reporter at CCN. Currently residing in Lagos, Nigeria, Victor focuses on writing news and providing readers with on-chain and technical analysis. Before he joined CCN, he worked as an analyst at BeInCrypto and AMBCrypto. He published several pieces at these outlets detailing investor behavior and analyzing price action across different cryptocurrencies. Victor holds a Bachelor's degree in Physics from the University of Ibadan. With his background, he finds it seamless to break down technical terms into simpler words while keeping readers engaged.
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