The surge in the value of XRP (XRP) during January might be approaching a stage of fatigue, as a growing bearish reversal indicator suggests a potential shift in market sentiment.
XRP price chart hints at 25% correction
Over the course of January, XRP experienced a significant rise, approximately 50%, peaking at $3.39 on January 18th – a level not seen in almost seven years. Nonetheless, this dramatic upward trend could encounter resistance, as technical signals suggest a possible correction, potentially dropping by around 25%.
The significant issue here lies in the downward trend of the Relative Strength Index (RSI) for XRP, even as its price reaches new peaks over several years. Instead of mirroring the rising price trend, the RSI has been moving in the opposite direction, forming a decreasing pattern.
The widening gap suggests that the strength driving XRP’s price increase may be decreasing, increasing the probability of a price drop in the near future.
Moreover, the value of XRP consistently hovers well over its 50-day exponential moving average (often represented as the red wave), which serves as a crucial technical floor for its price movement.
Currently, on January 18th, the 50-day Exponential Moving Average (EMA) is around $2.28, which is roughly 25% lower than XRP’s present value of $3.07. Typically, when a price rally extends too far, it returns to its EMA levels as traders book their profits and the market experiences stability. This was evident in the approximately 80% correction that followed a bearish divergence signal in 2018.
Additionally, the recent surge in XRP’s price has pushed its Relative Strength Index (RSI) to 66.87, moving close to the overbought level of 70.
At present, the RSI (Relative Strength Index) isn’t fully overextended, but its decreasing pattern indicates a diminishing interest among buyers at the current price points. This reduced buying pressure might lead to increased selling activity heading towards the potential support level of $2.28.
Is the XRP bull run over?
Previously mentioned, the bearish divergence of XRP suggests an increase in the possibility of a price drop towards approximately $2.28. This potential decrease coincides with the upper boundary line of its current bull flag structure.
In simpler terms, a bull flag pattern emerges when the price moves within a diagonal line that slopes downward following a significant upward trend. This consolidation period usually ends when the price surpasses the upper boundary of this line, leading to an increase in price that can be as high as the previous uptrend’s height.
The cryptocurrency XRP has moved into the ‘breakout phase’ of its ascending triangle chart formation. But remember, once it breaks out, the value might return to test the upper boundary of this pattern as a potential new level of support.
A repeat test verifies the breakout and offers a chance for fresh investors to jump in. If the price rebounds from the upper trendline, it bolsters the bullish argument and prepares the ground for a surge towards the initial upward goal.
For XRP, the projected peak of a bull flag pattern is approximately $4.42, which represents a 40% increase from its current value. Moreover, the overall future perspective for XRP remains positive due to the potential introduction of U.S.-based spot XRP exchange-traded funds (ETFs).
According to JP Morgan’s analysts, these funds could potentially manage between $4 billion and $8 billion in assets.
If the price of XRP doesn’t manage to stay above the upper boundary of its flag pattern, it might erase the overall bullish prediction. In this case, a potential new low could form around the flag’s lower trendline, approximately at $1.90. This level previously acted as support for XRP in December.
As a researcher observing this market, I can express it as follows: If the price were to dip below $1.90, I would interpret that as a clear shift in the trend towards bearish. This could pave the way for further drops, possibly leading us toward the 200-day Exponential Moving Average (represented by the blue wave) around $1.35.
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2025-01-18 12:48