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Technical Analysis

AVAX technical analysis: Inverted head and shoulders, reversal ahead?

Published: Oct 28, 2024
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As AVAX aligns with positive technical patterns, signs of a reversal are emerging. Discover the key support levels and potential upside targets in today’s outlook.

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Disclaimer: This is not financial or investment advice. You are responsible for any capital-related decisions you make, and only you are accountable for the results.


Market context

AVAX is showing strong signs of a potential bottoming formation with a clear inverted head and shoulders pattern forming. This aligns with areas where we've seen significant negative funding, particularly from July 22 onwards, suggesting a shift in sentiment as the price reached lows around $21.750 and $19.820.

Historically, AVAX's price action has reacted to periods of negative funding by rallying higher, making this alignment a key indicator of a possible reversal. A rounded bottom structure is also observed, adding further conviction for a bullish move, especially as we consider Total3's similar pattern, indicating broader altcoin strength.

2. AVAX daily chart showing downtrend breakout, highlighted buying pressure zone, and projected potential price increase towards resistance level above 60.webp

Market mechanics

Funding Rate: From November last year, funding has generally remained positive or near equilibrium, indicating sustained interest in longs. However, from April 2024, a bearish trend emerged in funding, intensifying into significant negative levels by July 22. This shift in funding sentiment corresponds with the recent lows and strengthens the argument for a potential bottom in AVAX.

3. AVAX funding rate chart highlighting significant spikes, low activity zone, and recent increase in funding rate, with blue and red zones.

Playbook

  • Build Zone: Continue building within the weekly buying pressure box, using levels from the inverted head and shoulders pattern to accumulate.
  • Upside Potential: Watching for confirmation of a rounded bottom, with a break above the key neckline to target a sustained uptrend.
  • Strategy: Maintain focus on spot accumulation and gradually increase position as the structure forms. Avoid leverage for now, as volatility may pick up if the inverted head and shoulders pattern confirms a move higher.
4. AVAX daily price chart showing potential buying pressure, horizontal support levels, and recent consolidation in blue zone below resistance.

Cryptonary's take

AVAX's pattern aligns well with broader market indicators, and funding trends show that this could be the foundation of a larger move. Holding within this structure allows for building a position with a strong risk-reward ratio, and the signs are aligning for a potential bullish reversal.

AVAX isn't an asset we currently hold or are included in our CPRO picks, but it remains a strong performer, has community interest, and is a promising technical formation.

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