Bearish Divergence, Or Are Bulls Baiting For The Next Move Up?
The recent push to $25 per token, has resulted in a massive bearish divergence on the weekly Relative Strength Index, spanning across the current peak and the 2020 high of $20, according to one crypto trader.
Coinciding with the bearish technical signal, is a more three-year long trendline that has acted as the top to every major rally. The chart below shows the long-term trendline on the LINKUSDT trading pair on Binance more clearly.
A massive bearish divergence spans across two years of LINKUSDT price action | Source: LINKUSDT on TradingView.com
Bearish divergences appear when price action sets a higher high, but a technical indicator on the same timeframe chart makes a lower low. It often suggests that although prices are reaching new highs, the underlying buying pressure is lower than during the first peak.
The weakness results in bears taking over, and forcing prices lower. Bearish divergences often appear at the top of a trend, but are difficult to act on.
Bearish divergences are only confirmed once price action has turned down. The lack of a higher high on a technical indicator could merely be due to the fact the bullish move is only yet just beginning. Taking a position in a long up-trending altcoin due to a bearish divergence could lead to any missing out on any additional legs up that might follow.
Given Chainlink’s long-term momentum, the bearish divergence – if invalidated – could supply the momentum needed for a much stronger push higher.