A recent rundown in the FLOW market has activated a bearish technical pattern, risking huge declines in the sessions ahead.
FLOW prices slipped on Thursday as traders unwind their bullish bets from the lately bullish digital assets.
The FLOW/USDT exchange rate lost up to 15.22% New York morning, a sharp reversal from Wednesday when the pair closed at a one-month high of $16.99 following a 43.87% rally. However, it continued its upside momentum in the early Asia-Pacific session, hitting $18.44 before correcting lower.
Thursday’s selloff in the FLOW market was broad-based and came in sync with a massive downside correction in the cryptocurrency market. For instance, Bitcoin, the flagship cryptocurrency that typically influences its digital asset rivals, plunged more than 5% in the previous 24 hours. The second-best Ethereum dipped more than 8% in the same timeframe.
All and all, the cryptocurrency market was down $52 billion on a 24-hour adjusted timeframe as of 15:52 UTC.
FLOW forms classic bearish pattern
More downside risks for FLOW appeared on an occurrence of a potentially bearish chart pattern dubbed as Head and Shoulders.
In detail, Head and Shoulders are bearish reversal structures that appear as a baseline—a.k.a. neckline—with three peaks. The middle peak is higher than the other two. The smaller peaks are more or less of the same height.
Traders usually fill their order below the neckline by calculating the downside target based on the high point of the head to the neckline. The distance is approximately how far the price could move after it breaks below the neckline.
FLOW appears to tick all the boxes so far, as shown in the chart above. The cryptocurrency formed a middle peak—the head—above $18 and the other two—the shoulders—within an approximately half a cent range of one another. Meanwhile, $14.522 served as a neckline.
The price broke below the support level with a slightly higher volume and continues to move lower into the U.S. session. Its profit target, as per the Head and Shoulder’s technical description, should be near $11.567, based on the percentile distance between the head and baseline (~20%).
On the daily chart, the path of least resistance also looks skewed to the downside.
FLOW/USDT holds $13.6682 as its last line of defense as its relative strength index shows signs of correction after closing in towards its overbought level (70). Should the selloff continue owing to market-wide bearish pressure, the pair’s next support levels would appear near its 50-day simple moving average (50-day SMA; the blue wave) and the 20-day exponential moving average (20-day EMA; the green wave).
The FLOW’s 50-day SMA SMA is currently around $11.78 and its 20-day EMA is near $11.22. Its head and shoulder’s downside target is right in the middle of the said moving averages.
Conversely, holding $13.6682 as support would increase FLOW’s potential to retest $18.42 as resistance, followed by an extended upside move towards the $22.62-26.11 range.
VORTECS™ Score flipped green
VORTECS™ data from cryptoprimacy.com/?via=markets”>Cointelegraph Markets Pro meanwhile detected a healthier outlook for the FLOW market prior to the rally, with its overall trade volumes and Twitter activity up by 520% and 269%, respectively.
The VORTECS™ Score, exclusive to Cointelegraph, is an algorithmic comparison of historical and current market conditions derived from a combination of data points, including market sentiment, trading volume, recent price movements, and Twitter activity.
The VORTECS™ Score is currently relatively high at 78 and previously flipped green when rising from 63 to 64 early on July 8 hours before the price spiked to over $18.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of cryptoprimacy.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.