Monero (XMR) has recently encountered significant resistance, leading to a dip after a promising rally. This analysis delves into the conflicting signals from technical indicators, weighing the potential for continued upward momentum against emerging bearish divergences that could signal a deeper correction.
Conflicting Technical Signals
XMR experienced a slight dip after testing the key resistance level of $418-$420, a zone that has proven challenging for weeks. This pullback followed a successful retest of the $360 support area and a subsequent rally, aligning with previous bullish predictions. On the weekly chart, Monero exhibited a bullish swing structure, with the $367 retracement level being defended and the Relative Strength Index (RSI) hinting at positive momentum with a reading of 59.
Emerging Bearish Divergence and Weakening Demand
Despite the weekly chart's bullish outlook, a critical bearish divergence has appeared in the On-Balance Volume (OBV) over the past seven months. This divergence, marked by lower highs on the OBV while price rallied, suggests that Monero's recent gains may be built on weakening demand, indicating an unsustainable trend. Furthermore, the 4-hour chart reveals a shift towards bearish momentum, with the RSI dropping below the neutral 50-mark and the OBV falling to new lows, underscoring increased selling pressure. This technical breakdown implies that XMR is likely to test the $395 support level next.
Outlook and Trader Considerations
Given the current technical landscape, traders should exercise caution. The rejection at the $420 level points to a lack of immediate bullish strength for a sustained rally towards $450. A drop below $400 is anticipated, with immediate support levels identified at $395, $380, and the crucial $360 demand zone. Traders in long positions are advised to consider taking profits. For new long entries, a significant boost in altcoin confidence, potentially triggered by Bitcoin (BTC) rallying above $94k, is deemed necessary before considering going long on XMR. The overarching lack of buying pressure, as indicated by the OBV, warrants vigilance against premature bullish bets.
