//Chainlink Downtrend Could Continue Toward New Lows Despite Record Rebound
Blockchain News

Chainlink Downtrend Could Continue Toward New Lows Despite Record Rebound

Chainlink recently saw a record-breaking rebound, closing an intraday rally with more than 30% gains on the day. The recovery kept climbing but has since turned around at the top of a downtrend channel that thus far has been holding.

Will the downtrend take the cryptocurrency lower? And what other factors back up any theories predicting more downside in the altcoin ahead?

Chainlink Downtrend To Deepend, Following Record-Breaking Rally And Rejection

Last week, after sweeping lows, Chainlink rebounded from under $8 back up to over $11 at the local high. The over 30% surge broke records for the most green day in all of 2020 – a year where the altcoin has been just about unstoppable.

The year started off with the cryptocurrency setting fresh highs, only to collapse during the Black Thursday carnage to nearly zero.

The bounce from lows sent Chainlink on a journey toward price discovery mode, and eventually peaked at $20 per LINK token.

From that peak, however, a downtrend channel has formed, and despite a record-breaking rally last week, the cryptocurrency was unable to break free. Failure to break out from the downtrend, could lead to new local lows.

chainlink linkusd downtrend

LINKUSD Daily Downtrend Pitchfork Channel | Source: TradingView

Technical Indicators Gives Credence To Crypto Asset’s Further Collapse

Downtrend channels are subjective, extended across price action manually using technical analysis drawing tools. But technical analysis indicators are created using precise mathematical formulas, leaving little room for interpretation and user error.

These various tools, also suggest that Chainlink is ready for another dive lower.

According to the Bollinger Bands, a volatility measuring tool consisting of a moving average and two standard deviations, Chainlink was just rejected from the “mid-BB.” Rejections from this area, often are followed by a move to retest the lower band.

Reclaiming the middle-line, would suggest the opposite and send Chainlink towards the top of the band.

chainlink linkusd bollinger bands

LINKUSD Daily Middle Bollinger Bands Rejection | Source: TradingView

The Bollinger Bands aren’t the only indicator backing up the idea behind the downtrend channel. The Ichimoku indicator also paints an extremely bearish picture.

The “at a glance” indicator says a lot about price action. Looking backward on the chart, the chikou span, or lagging span, shows the price line hanging onto weak support.

chainlink linkusd ichimoku

LINKUSD Daily Ichimoku Rejection | Source: TradingView

The chikou span traces back 26 trading sessions and helps plot support and resistance levels. The chikou span looks back, but the cloud looks ahead. The cloud itself is twisted bearish, suggesting bearish future price action.

Finally, the kijun-sen (red) is above the tenkan-sen (blue) line signaling bearish price action, and Chainlink itself is in the process of being pushed downward further by the kijun-sen.

Using the Ichimoku indicator to find potential levels of support lower than the previous level that held, points to targets of $6 and $4.80 per LINK token. Unless the cryptocurrency can burst upward out of the downtrend channel, that is.

Featured image from Deposit Photos, Charts from TradingView