Analysis shows BNB is not out of the woods yet and the recovery rally could be short-lived.
- BNB’s long-term technical chart paints a bearish picture, favors a re-test of recent lows near $200.
- Failure to keep gains above Tuesday’s low may lead to a fresh sell-off.
- The daily chart shows signs of indecision, stressing the need for quick progress above Tuesday’s high of $376.
Have cryptocurrencies bottomed out? That’s the biggest debate in markets right now.
Binance coin or BNB, an ERC-20 token used to trade cryptocurrencies and pay fees on the Binance exchange, has bounced to $350 from last week’s low of $211, tracking bitcoin’s recovery rally to $39,000.
However, technical charts suggest BNB may not be out of the woods yet and could trap bulls on the wrong side of the market.
Weekly chart is biased bearish
The MACD histogram has dropped below zero, indicating a bearish shift in sentiment. The indicator has turned negative for the first time since December.
The 5- and 10-week SMAs (simple moving averages) look set to produce a bear cross. The pattern occurs when a short duration average drops below a long duration and is widely used as a cue for entering shorts.
And while the RSI (relative strength index) has recovered from last week’s low, it remains below resistance at 60. The level, established as the bull market support in November, was breached last week. In addition, the indicator invalidated the multi-month rising trendline, signaling an end of the bull run.
Traders, therefore, may be inclined to sell the cryptocurrency on the bounce.
The broader bias would remain negative as long as the RSI holds below 60 and the previous week’s high of $564 remains intact as resistance.
Oversold bounce running out of steam
The recovery rally is already showing signs of exhaustion, with bulls and bears unwilling to lead the price action above $300. That’s evident from Tuesday’s Doji candle comprising long upper and lower wicks and a small body.
The Doji has weakened the immediate bullish case, making Wednesday’s closing price level pivotal.
A close above $376 (Tuesday’s high) would indicate a continuation of the recovery rally and shift the focus to resistance at $427 (April 18 low).
Alternatively, a close below Tuesday’s low of $307 would signal an end of the corrective rally and fuel a fresh decline toward the recent low of $211.
As of writing, the token was trading near $360.
This is a guest post. Investing in cryptocurrencies is speculative and investors should carefully conduct all research and diligence before making trades.