Tezos is currently in a precarious situation, as it is trading just a hair above a crucial trendline that has been supporting its price and guiding its recent mid-term uptrend.
This level was briefly broken below earlier today when XTZ faced a massive influx of selling pressure, but buyers have since been able to step up and guard against any further near-term losses.
One analyst is noting that the horizontal support at this trendline is rather weak, which could indicate that further downside is imminent before it can garner any significant buying pressure.
If this trendline is defended, an ascending channel that it has formed suggests that a rally up towards $7.31 could be brewing.
Because Tezos – like most other altcoins – has grown to be highly correlated with Bitcoin and Ethereum, where these digital assets trend next could have a heavy influence on XTZ.
Tezos Could Plunge Lower Before Finding Any Strong Support
At the time of writing, Tezos is trading down over 1% $3.39, which marks a notable decline from its multi-day highs of $3.80 that were set just a few days ago.
These highs came about after bulls posted an ardent defense of its recent lows at $3.30 that were tested a week ago.
This support level was tested once again earlier today, and bulls were able to guard this level.
Despite the strength of this support level, one analyst is noting that its downside liquidity region sits between $3.10 and $3.20.
As seen on the chart he offers below, the support here may be enough to spark a strong rebound that leads it up towards his mid-term target of $4.10.
“A scenario I’ve got on Tezos,” he said while referencing the below chart.
Image Courtesy of Crypto Michael. Chart via TradingView.
This Trendline Could Spell Doom for XTZ if Broken Below
Another analyst explained in a recent tweet that Tezos is flirting with a break below the lower boundary of a crucial ascending channel that has been guiding its multi-month uptrend. This boundary exists around $3.40.
“XTZ flirting w/doom on this PF but if assumption = PF will hold, this is ideal buy opp. Current midline = 7.31,” he explained.
Image Courtesy of Josh Olszewicz. Chart via TradingView.
If this level is firmly broken below, and Tezos is unable to quickly recapture its position within this channel, the crypto could be poised to see a strong mid-term downtrend.
Featured image from Unsplash. Charts from TradingView.