Polygon's latest bearish engulfing candles streak has substantially deteriorated buying efforts as MATIC dived beneath its 3-month trend-line resistance. Investors should consider a few warnings as the current structure favor sellers.
The prevailing selling activity outside a bearish pennant might see MATIC recording undesired losses in the short term. For now, it has hindered the bulls' comeback opportunities. While writing this content, Polygon traded around $0.599, losing 4.65% within the past day.
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Polygon Daily Timeframe
From a rational standpoint, the latest dip beneath the 3-month trend-line might intensify the selling momentum. This decline chalked a bearish pennant on MATIC's shorter and daily timeframe. Meanwhile, the 23.6% FIB resistance hindered higher prices after the token hovered around the POC (Point of Control) for more than one week. Rejections from the said resistance saw MATIC on a downside break from the bearish pennant.
The current candle closing beneath $0.59 would see MATIC losing its 13-month foothold to affirm extended declines. Such scenarios would set the possible shorting targets inside the $0.427 - $0.5 value area. Fading trading volumes amidst the pennant oscillation further supported possible stretched declines.
Nevertheless, analyzing the gap between 20 Exponential Moving Average and 20EMA indicated a potential revival for MATIC. These EMAs haven't seen such a distance since May 2021. Sellers dwindling will mean a compression period at the $0.5 level for MATIC.
Reasoning
The Relative Strength Index witnessed a recovery from the oversold region within troughs and peaks within the past couple of days. The indicators witnessed a climbing wedge breakdown following a bearish divergence with MATIC price. The index required a closing beneath the 31-baseline to magnify the probability of benefiting from a short.
The DMI supported the bearish standpoint, with the –DI staying north. Nevertheless, the Chaikin Money Flow printed higher highs, suggesting potential bullish divergence with Polygon price. Such a move would amplify the chances of a constricted phase.
Final Thought
For now, MATIC seems primed for downtrends amidst trend-line resistance, the POC, and the bearish pennant rejection by 23.6%. Nevertheless, the possible CMF divergence and the EMA20 – EMA 200 might favor bullish moves. Therefore, market players should wait for a closing beneath $0.55 - $0.59 to execute short calls. Profit booking levels would not change, as mentioned above. Furthermore, watching BTC price actions is essential as MATIC shares a 97% monthly correlation with BTC.
Editorial credit: photo_gonzo - shutterstock.com
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