ATOM’s ascending price channel might be disrupted after this event
ATOM has been one of the favorite cryptocurrencies for swing traders since mid-June. This is because it has been gradually recovering from its bottom range but in predictable price swings between support and resistance.
However, ATOM’s upside is now threatened by resistance near the $12.20 price zone.
ATOM retested the same resistance level in the last two days, and each time was characterized by rejection.
This confirmed that there was significant selling pressure above $12. Interestingly, ATOM encountered resistance within the same price zone in May.
This is because it was within the 0.236 Fibonacci retracement level.
If ATOM manages a breakout above the 0.236 Fibonacci retracement level, it would likely face resistance near the $13 range.
This is because further upside would push it towards its ascending resistance line.
Assessing breakout/retracement probabilities
Although ATOM can potentially break out of the current resistance level or even the next, there is also a possibility of a sizable retracement.
Some on-chain metrics seem to be in favor of the latter. For example, the Binance funding rate dropped substantially from its normal range, indicating a decline in demand from the derivatives market.
The lower investor demand also reflects the relatively low social volume. This enforces the idea that demand for ATOM at current price levels is diminishing.
The weighted sentiment metric also aligned with this view.
Moreover, with a press time figure of -0.231, the weighted sentiment metric confirmed that the overall market sentiment was gradually shifting in favor of the downside.
Although the weighted sentiment is down drastically since the start of May, it is near the neutral line.
A substantial pullback would likely trigger a cascading effect as more investors adopt a negative sentiment.
What should investors expect?
ATOM’s current outlook based on technical indicators and on-chain metrics suggests that is due for a short-term retracement.
However, investors should note that the overall market conditions currently favor a mid-term rally. This means the potential downside might be limited.
The crypto market has been experiencing a period of calm after turmoil and uncertainty in May and June.