Frax‘s price experienced a 29% decline from its mid-August peak of $7 to a low of $5 on September 11 after consolidating for a while. However, it has since rebounded by 19.6%, reaching nearly $6 today.
As it approaches a crucial resistance level, the question is whether it will face rejection and enter another downtrend or break out for further gains.
Examining the daily chart below, we observe that the price of FXS has been in a bearish cycle since it reached its all-time high of $53.60 on January 13, 2022.
Initially, it declined by 68% to $17 on January 25, a level it revisited in February and March. Subsequently, there was a substantial recovery, nearly revisiting the all-time high in early April 2022.
Following this, a more substantial downward movement ensued, resulting in a staggering 91.5% decline, reaching its lowest point just below $4 on June 15, 2022. This marked the lowest price within this bearish cycle and established itself as a significant horizontal support zone.
On February 7, 2023, the price surged to $14.40 from this aforementioned support area, reflecting an impressive 235% increase. However, a downtrend followed, persisting until June 14, when the price dropped to $4.66, hovering near the upper boundary of the horizontal support zone.
These price fluctuations shaped a large descending flat triangle, with its resistance level corresponding to the descending trendline and its support aligning with the mentioned horizontal zone. Today, the price once again tested the descending resistance, raising the possibility of another downward move from the current levels.
As we approach the apex of this triangle, an impending breakout is anticipated. However, it remains uncertain which direction is more likely to prevail.
As per the Elliott Wave count, it appears that the price has been undergoing a complex WXYXZ correction since its mid-August peak.
If this analysis holds, today’s peak could be interpreted as the B wave within the most recent ABC correction to the downside, signifying the Z wave within the highest degree of correction.
The Relative Strength Index (RSI) is signaling potential overbought conditions, reinforcing the likelihood of a rejection at the present resistance level. Should this rejection occur, it could result in a breakout below the ascending trendline and potentially breach the horizontal support zone near $4.
In the event of a further decline, the most favorable price target would be the 1.618 Fibonacci extension level at $3.48.
Alternatively, it may encounter support again at the horizontal support zone, but given our anticipation of a final downward move, a new low appears more probable.
Please note that the contents of this article are not financial or investing advice. The information provided in this article is the author’s opinion only and should not be considered as offering trading or investing recommendations. We do not make any warranties about the completeness, reliability and accuracy of this information. The cryptocurrency market suffers from high volatility and occasional arbitrary movements. Any investor, trader, or regular crypto users should research multiple viewpoints and be familiar with all local regulations before committing to an investment.