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Head and Shoulders Pattern Suggests Chainlink (LINK) May Drop Below $10 in July

The head and shoulders pattern - one of the technical analysis classics - suggests that Chainlink (LINK) could drop below $10 next month.
Head and Shoulders Chart Pattern of Chainlink

Despite Chainlink (LINK) increasingly playing a crucial role as a data provider for major projects in the Oracle and Real World Assets sectors, its price performance in June has been less than stellar. From a technical analysis perspective, LINK shows signs of a potentially significant decline in July.

Chainlink (LINK) Could Drop Below $10 Next Month

In May, LINK saw a price recovery from around $12, only to undergo a correction in June, completing the right shoulder of the head and shoulders chart pattern. However, this pattern typically requires one final move: a drop back to the previous low.

The head and shoulders pattern forms when a coin’s price rises to a peak declines back to the base of the previous up-move, rises above the prior peak to form the “head,” and then declines back to the original base. Finally, the coin’s price peaks again at approximately the level of the first peak before falling back down.

Considered one of the most reliable trend reversal patterns, the head and shoulders pattern signals, with notable accuracy, that an upward trend is nearing its end.

Head and Shoulders Chart Pattern of Chainlink
LINK price chart on CoinGecko

In the case of LINK, the head and shoulders pattern suggests a continued price decline in the coming weeks. It’s crucial to note that the confirmation of this pattern happens when LINK breaks the $12 support level. For instance, if a daily candle closes below $12, the likelihood of the head and shoulders pattern playing out increases, meaning the price could drop significantly once this support is broken.

Price Range $8.8 – $12 and Historical Volatility

The price range between $8.8 and $12 has seen considerable volatility during 2022 and 2023. Historically, when LINK enters this range, it tends to move quickly without stopping at specific resistance or support levels. Therefore, if LINK falls below $12, we can predict that the price will continue to drop rapidly until it reaches the $8.8 support zone. This is an important factor to consider when forecasting future price movements.

Bearish MACD-H Signal

LINK is at a crucial 2024 support level, near $12. This price point is critical; if broken, it could lead to a steeper decline. Additionally, the MACD-H indicator on the 2-week (2W) timeframe shows bearish signals. A bearish crossover has occurred, and the MACD-H histogram displays negative red bars. These signals typically indicate a downtrend. Historically, such signs confirmed LINK’s significant price drops, like in 2021. Therefore, despite LINK being at an important support level, high risks persist due to bearish technical indicators.

Short-term traders might consider cutting losses if LINK drops below $12. Medium to long-term investors might wait for LINK to fall to the $8.8 support zone or lower before taking a position.

Recent on-chain data highlights increasing selling pressure on LINK at the end of June, reflected by a surge in LINK moving to exchanges. According to Santiment data shared by Ali_Chart, in the last week of June, 18.77 million LINK worth approximately $256 million were transferred to exchanges. This move comes as LINK’s price has been declining since the start of June, indicating potential for further selling pressure on exchanges.

These are all our assumptions based on real evidence for investors to take note of before making an investment decision for this coin.

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