The IOTA value on Thursday continued to trend downwards and fell more than 18 percent since its late August-high near $0.8154.
The IOT/USD stated the early Asian trading session by breaking below a critical support level around 0.7294-fiat, opening a path of least support towards the next downside targets. As the session matured and the European timing came into play, the pair had already fallen by 8.7 percent. IOT/USD is now near the early August resistance – visibly a strong one to the upside – near 0.6751-fiat, which is now weak support to the current bearish momentum.
In a more extended run, the pullback could only point to traders executing their long positions towards the intraday peak. Speculators pumped the price from previous lower lows after taking cues from a couple of strong fundamental events, including Fujitsu decision to name IOTA blockchain as its new protocol standard. The bull flock started exiting the market on decent intraday profits, and new bulls went into a hibernation state. Thus, a sharp pullback came into view.
A larger timeframe would show the correction as a knee-jerk reaction – a bull pennant formation – in the context of medium-term bullish sentiment. An outright dump, on the other hand, would make it a classic Head & Shoulder pattern, with its neckline coinciding with 0.5964-fiat.
The IOT/USD pair is currently testing its 200H moving average output (depicted in red), while the 100H moving average is far below for now. The RSI indicator is now floating above 40, which considered a neutral area with an inclination towards the bears. The Stochastic indicator, meanwhile, has dropped inside the oversold region, expecting a correction.
IOT/USD is currently neutral, but only on margins. A slip below 200H MA could intensify the selling sentiment and signal a push towards the next downside target near 0.5964-fiat. It would be wise to keep yourself away from trading around a falling knife scenario. Thus, looking for a strong bounce back is essential before entering new intraday positions.
For instance, if a bounce back takes place around the 0.6751-support, traders can first wait for a breakout above 0.7294-fiat. Should it happen, it will bring 0.8154-fiat back in sight as a potential upside target. Any long position, in the meantime, should be protected by a stop loss just 3-pips below (1 pip movement ~ $0.0010).
If price continues to drop, the neckline of the in-making Head & Shoulder pattern – at 0.5964-fiat – could make a decent short target. Make sure to keep a stop loss ready 3-pips above the entry point.
Featured image from Shutterstock. Charts from TradingView.