Disclaimer: The information presented does not constitute financial, investment, trading or other advice and is solely the opinion of the author.
- ZIL’s upward momentum weakened.
- Open rates and sentiment eased, further strengthening a potential reversal.
By Zilliqa [ZIL] The widening divergence between key technical indicators could weigh on investors and traders, not counting the 90% gain posted by ZIL in its most recent rally.
Reading By Zilliqa [ZIL] Price Prediction 2023-24
Rising RSI Divergence on 12-Hour Time Frame Chart – Is Price Reversal Possible?
The formation of an ascending channel pattern captured ZIL’s recent rally. In particular, the uptrend got a huge boost from rising buying power, as evidenced by increasing volumes (rise in OBV).
However, the rising price action was also marked by a drop in the Relative Strength Index (RSI), forming a price/RSI divergence. The divergence could indicate a possible reversal, which could target the $0.02504 support level – a 10% plunge. So far, the 26 and 200 period EMAs (exponential moving averages) are keeping extended declines in check.
But a convincing break above the channel would propel the bulls to reclaim the pre-November $0.03345 level. Such a recovery would negate the bias described above.
Regardless, such a rally may be difficult due to the weakening of the uptrend, as shown by the Average Directional Indicator (ADX). The ADX is making lower highs since mid-January, indicating the weakening of the uptrend.
Sentiment turned negative as OI declined
ZIL has seen an increase in demand since January, as evidenced by the positive Funding Rate over the same period. However, the asset’s weighted sentiment turned negative at press time. Moreover, a decline in investor confidence could further undermine ZIL’s upward trend.
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In addition, ZIL’s open interest (OI) rate has been declining since January 10, despite rising prices. As a result, more money flowed out of the ZIL futures market, which undermined a strong uptrend.
Furthermore, the increasing price/OI divergence could signal a possible trend change. Therefore, investors and traders should be careful with their moves, as the ZIL market structure could be a potential “bull trap”.