Bearish Divergence Hints At First Major Chainlink Corrective Phase

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Chainlink was one of the first cryptocurrencies to hit a new all-time high in 2020. However, due to his absence during the 2017 peak, there were other circumstances and no overhead resistance. The altcoin was almost untouched by the bear market in recent years and broke record after record.

However, a massive bearish divergence has formed as the unstoppable cryptocurrency touched an ascending trendline for the third time. Could this be the start of the altcoin’s first extended bear phase? Or are bulls preparing for a much stronger push to finally break the long-term trendline?

Chain link in danger of the first major correction phase, so Bear Div

In 2017, the meteoric rise of Bitcoin and the explosion of ICOs based on Ethereum put the cryptocurrency asset class on the map. But after a storm of exuberance and parabolic price movements, the bubble burst and these assets collapsed by as much as 90% or more in many cases.

Even the longest-lived crypto asset, Bitcoin, fell 84% from high to low, resulting in a three-year bear market. During this time, however, Chainlink made its debut in the crypto space and has been on an unstoppable upward trend ever since.

Related reading | Analyst: After a 50% regression against Bitcoin, Chainlink is “ready” to rise

The altcoin went from near worthless to over $ 25 recently, at its peak in 2021. Chainlink was born from a bear market and hit all-time highs left and right before a bull market was confirmed.

As things got bullish, Chainlink even joined Bitcoin and Ethereum and set another record. The entire market has retreated again, but the rising altcoin remains close to the 2021 highs.

$ LINK, 🧐 pic.twitter.com/bKsLeUgnsi

– heDer EW-Typ (@TheEWGuy), January 25, 2021

Bearish divergence, or are bulls baiting for the next climb?

The recent spike to $ 25 per token has resulted in a massive bearish divergence in the weekly Relative Strength Index, spanning the current high and 2020 high of $ 20, according to a crypto trader.

Simultaneously with the bearish technical signal, there is a three year trend line that has acted as the spike in every major rally. The following graphic shows the long-term trend line of the LINKUSDT trading pair at Binance more clearly.

A massive bearish divergence spans two years of LINKUSDT price movement Source: LINKUSDT on TradingView.com

Bearish deviations occur when price action makes a higher high but a technical indicator on the same timeframe chart hits a lower low. This often suggests that while prices are making new highs, the underlying buying pressure is lower than during the initial high.

The weakness causes bears to take over and lower prices. Bearish deviations often appear at the top of a trend but are difficult to manage.

Related reading | Altcoin Expert: Buy A Crypto That Will Last During Bitcoin Failure

Bearish deviations are not confirmed until the price movement has been rejected. The lack of a higher high on a technical indicator could simply be due to the fact that the uptrend is just beginning. Taking a position in a high-trending altcoin due to bearish divergence may result in missing additional legs to the upside.

Given Chainlink’s long-term momentum, the bearish divergence – if invalidated – could provide the momentum needed to make a much bigger rise.

Featured image from deposit photos, charts from TradingView.com