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XRP Bulls on Alert! —Why $2.25 Could Signal a Bearish Reversal
The cryptocurrency market has been witnessing significant fluctuations in recent times, and Ripple’s [XRP] price action is no exception. Despite the recent break above the six-week trendline resistance, XRP bulls must be cautious as the higher timeframe trend for XRP remains bearish. In fact, a short squeeze could occur over the next 24 hours.
An analysis of the daily chart reveals that traders should not FOMO into buying XRP after the break above this trendline resistance. The possibility of a short squeeze means traders can look for opportunities to short XRP after a minor bounce.
The price chart shows a bearish structure in play, with a lower high at $2.23 that has yet to be breached even though the trendline resistance was broken. As such, the bearish outlook must be retained by traders.
It’s essential to note that the RSI (Relative Strength Index) is currently at 54, indicating a bullish momentum shift. However, this positive sign is overshadowed by the OBV (On Balance Volume), which shows that the volume indicator is in a downtrend alongside the price. Therefore, investors and traders must be cautious of taking bullish positions until the OBV can set a new higher high to signal steady demand.
Furthermore, Fibonacci retracement levels reveal that $2.46 and $2.7 are formidable resistance levels beyond the local resistance at $2.23. This suggests that any rally towards these levels could lead to significant selling pressure.
Interestingly, Open Interest (OI) behind XRP has increased over the past 24 hours as the price rallied by 6%. However, this increase in OI was not accompanied by a rise in spot CVD (Cumulative Volume Delta). This lack of buying pressure suggests that the recent rally was driven by derivatives and could falter soon.
The liquidation heatmap further reinforces this view. It shows a cluster of high-leverage liquidations just above the XRP market price, stretching all the way to $2.25. The increased cumulative leverage overhead means short sellers may get hunted in the short term before a bearish reversal occurs.
In conclusion, while the recent break above trendline resistance is encouraging, it’s essential for XRP bulls to exercise caution. With a higher timeframe trend remaining bearish and potential risks of a short squeeze or selling pressure at Fibonacci levels, traders would do well to reassess their positions and prepare for a potential reversal around $2.25.
Source: https://ambcrypto.com/xrp-bulls-on-alert-why-2-25-could-signal-a-bearish-reversal/
