Axie Infinity Shorts MUST keep this in mind before selling
Warning: The conclusions of the following analysis are the sole opinions of the author and should not be taken as investment advice.
After hitting its ATH on November 6, Axie Infinity (AXS) began its downturn in a descending channel (white) as the bears continued to test the crucial $46 support.
As AXS enters a low volatility phase, the chances of a volatile move in the days ahead will be much higher. Any close below the $45 support would trigger a short signal while confirming the descending triangle.
If the support holds, the alt could continue its compression phase for some time before conforming to the long-term trend. At press time, AXS was trading at $46.598.
AXS Daily Chart
The retracement phase marked two bearish channels (white) on its daily chart as the alt lost almost 74.4% of its value (from its ATH) and touched its six-month low on February 24th. As a result, AXS struggled to swing above its control point (POC, red).
Throughout its descent, the alt continued to break through vital Fibonacci support levels while holding the 78.6% level. As a result, AXS has displayed a descending triangle on its daily chart for the past ten weeks. As the sellers revealed their edge, the gap between the 20-50-200 EMA widened significantly.
Now, immediate support is vital for the bulls to defend against a major fallout. Any short-term bullish retracement would continue to find resistance at the POC and the upper trendline of the triangle.
If the RSI binds to its trendline support, it would confirm a bullish divergence. In such a case, AXS would gain strength to test its immediate resistance. Also, the OBV followed a similar trajectory and insisted on not underestimating purchasing power.
Nonetheless, the MACD lines are still struggling to close above the middle line while the histogram continues to be in a tight phase.
One cannot rule out the chances of a near-term rally in light of his RSI and OBV readings. But, its long-term trends favored the sellers, as evidenced by the descending triangle.
Additionally, alt shares an 80% 30-day correlation with Bitcoin. Thus, keeping an eye on Bitcoin’s movement would be essential to making a profitable move.