AVAX → Avalanche At Resistance! Reversal Time? Let's Answer.Avalanche had one more nudge toward the 2021/2022 resistance level since my last analysis, creating a bearish divergence and setting us up for a short trade. Should we short now?
How do we trade this? 🤔
As stated in my last analysis and this one, we need a short signal and confirmation for justification to short AVAX. Our proposed third push up from the previous analysis never rendered a sell signal and has now created a bearish divergence with the RSI. This means the price had a higher high and the RSI a lower high, signaling weakening bulls.
This does *not* mean we enter a short now, it's too risky without more price action. We need a strong sell signal and preferably, a break below the channel support and a re-test for resistance. Then short down to the Daily 200EMA at a 1:2 Risk Reward Ratio. It's also reasonable to take half profits at a 1:1 Risk Reward (around $28.00) and swing the remainder at a 1:3 risk reward or until a reversal signal shows itself.
💡 Trade Idea 💡
Short Entry: $34.00
🟥 Stop Loss: $25.00
✅ Take Profit: $40.00
⚖️ Risk/Reward Ratio: 1:2
🔑 Key Takeaways 🔑
1. Bull Channel, Bias to Long!
2. Three Pushes up in Trend with Sell signal, Signal to Change Trend.
3. Gap to Second Push Support Line.
4. RSI at 63.00 and below Moving Average, Divergence.
5. Wait for Short Confirmation bar before entering a position.
💰 Trading Tip 💰
Divergences between price action and the RSI are not strong signals on their own. Combined with three pushes up in a trend, a major resistance area, and a sell signal, renders a higher probability of profit for reversal trading.
⚠️ Risk Warning! ⚠️
Past performance is not necessarily indicative of future results. You are solely responsible for your trades. Trade at your own risk!
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