Avalanche (AVAX) has been on a downtrend since mid-April, resulting in 35% losses toward the $14 demand zone. As a result, Avalanche’s price has breached key support zones and now faces an uphill task on its recovery journey. The technical outlook shows a bullish setup that forecasts a massive up move in the price.
What Double Bottom Pattern Means For AVAX
Avalanche’s price action has formed a double-bottom chart pattern on the daily chart (see below). This pattern is regarded as bullish and denotes a trend reversal. It often develops when an asset tries to retest a specific support area twice. A moderate price peak separates the two bottoms, marking the neckline.
AVAX has already reached the second bottom and was trading below a crucial supply area ranging from $15.92 to $17.15, where all the major Simple Moving Averages (SMAs) sat.
The pattern would be completed if the price cracks the resistance barrier described above, particularly $16, embraced by the 200-day SMA. It may signal the beginning of a 58% growth to $22.8, as shown on the chart.
AVAX/USD Daily Chart
The Moving Average Convergence Divergence (MACD) indicator had sent a call to buy Avalanche on the same daily chart. This happened earlier on Tuesday when the 12-day Exponential Moving Average (SMA) crossed above the 26-day EMA, adding credence to AVAX’s bullish narrative.
Note that Avalanche’s upward momentum will gain more traction once the MACD crosses the zero line into the positive region.
On the downside, AVAX faced stiff resistance on the upside. This could lead to a significant surge in selling pressure, forcing the bulls to retreat.
The stiffness of the barrier at $16 was further accentuated by the In/Out of the Money Around Price (IOMAP) model from IntoTheBlock. The IOMAO chart below indicated that AVAX faced relatively strong resistance on the upside, as compared to the support it had on the downside.
Particularly, the hurdle posed by the 200-day SMA around $16 was within the $15.54 and $16.07 price range where 8.46 million AVAX tokens were previously bought by roughly 190,180 addresses.
Avalanche IOMAP Chart
Any attempt to push the price above this level would be met by immense selling from this cohort of investors who may want to break even.
Moreover, the Relative Strength Index (RSI) was facing down and the price strength at 35 close to the oversold region suggested that the sellers were in control of AVAX price.
Therefore, a daily candlestick close below the $14 psychological level, would be detrimental to the buyers. In such a case, the Avalanche price could crash 23% to retest the $10.57 swing low.
