Chainlink price pattern formation: what does it mean for its price action

In the recent trading sessions, Chainlink (LINK) has displayed a bullish trend. It experienced a significant bounce off its $5 support level and has since continued to move higher.

Over the past week, LINK is up more than 12%, although its daily chart is showing a slowdown in gains. The coin formed a bullish reversal pattern, causing a huge jump in prices.

The technical outlook for LINK reflects bullish strength, although there has been a slight decline in demand and accumulation on the charts. In recent trading sessions, LINK has formed a pattern that suggests a possible reversal in price direction.

To prevent this reversal, it is important for LINK to maintain its upward momentum and overcome the immediate resistance level. Additionally, a slight decline in market capitalization indicates a reduction in buying power.

Chainlink Price Analysis: One Day Chart

At the time of writing, Chainlink (LINK) was trading at $6.90. The coin has exhibited significant bullish momentum following the recent reversal from the $5 level, prompted by the formation of an inverted head and shoulders pattern over the past week.

However, despite the upward move, LINK may face resistance around the $7.30 mark, which has historically acted as a strong boundary for the coin.

This resistance is further supported by the formation of a double-top pattern (marked in red), which is considered a bearish signal.

As a result, there is a possibility that LINK could experience a drop towards the local support level of $6.60 and possibly towards $5.80 before attempting a recovery once again.

technical analysis

During the formation of the double-top pattern, there was a significant drop in buying strength, indicating an impending bearish price movement. The Relative Strength Index (RSI) indicated a bearish divergence, indicating a decrease in demand.

Although the RSI remained above the halfway line, the reading indicated reduced buying strength. Despite this, LINK has managed to stay above the 20-simple moving average (SMA) line, which shows that the buyers still have control over the price momentum.

However, if there is a downside break from the current price levels, this could lead LINK to drop below the 20-SMA (red), which could bring sellers back into the market.

On the one-day chart, the altcoin is displaying buy signals, although these signals are showing a slight downside bias.

The Moving Average Convergence Divergence (MACD) indicator, which shows price momentum and trend change, has formed a downtrend in the green histogram, suggesting a possible decrease in buy signals.

Additionally, the Bollinger Bands, which indicate volatility, are wide open, indicating the potential for significant price volatility in the coming trading sessions.

Featured Image from Unsplash, Chart from Tradingview.com