VeChain threatens a breakout with a bearish pattern, investors should be careful at these levels
Disclaimer: The information presented does not constitute financial, investment, trading or other advice and represents the opinion of the author only.
VeChain [VET] has been facing strong selling pressure in recent months. This pressure had not yet diminished. Additionally, the price was precariously perched atop the $0.021 support level. At the same time, a bearish trend has also developed on the price charts. Overall, the situation was quite bearish for VeChain.
VET – 12 hour chart
In May, VET ranged from $0.029 to $0.034. A week into June, sellers were able to exceed buyers’ offers in the region of $0.029, and a move as far south as $0.02 began. Based on the swing high and low of this downward move, a set of Fibonacci retracement levels (yellow) have been drawn.
The 50% and 38.2% retracement levels at $0.0266 and $0.025 were tested as resistance. They were not breached and the market structure remained strongly bearish. Even though VET saw an increase from $0.021 to $0.026 towards the end of June, there does not seem to be enough demand to initiate an upward trend. The Relative Strength Index (RSI) was also unable to break above the neutral 50 and tip it towards resistance. Once again, the bearish bias was highlighted by the RSI.
Along with the downtrend, a descending triangle pattern was also forming. The basis of this pattern was at the $0.0215 support level.
VET – 4 hour chart
On the four-hour chart, there were two prominent regions highlighted in cyan and red. These two areas represent bullish and bearish order blocks respectively. The base of the triangle pattern has also offered support in recent weeks.
Generally, when such a triangle pattern forms after a downtrend, it signals a continuation of the downtrend. A move south should break below the $0.021 demand zone, and a retest matches the supply.
The four-hour chart saw mixed momentum for VET. The RSI could rise and decline at either extreme. It appeared to be defending the neutral 50 level at press time. Therefore, a return below the neutral 50 was something to watch.
The Aroon oscillator showed that the Aroon Up was dominant. The price chart, however, showed a lower high on a downtrend shape. Hence, the indication was that a steady downward move can be expected as the Aroon Down begins to climb.
The A/D was also stable, to denote the lack of buying volume behind VeChain.
Over the next few days, especially given the higher bearish momentum, it appeared that a downward move was more likely for VeChain. A bearish retest of the $0.021 region could be used to enter a short position. The stop-loss could be set above $0.023 for very conservative traders who want to give themselves a large margin of error.
The height of the triangle pattern measures $0.005, so a target for short sellers to take a profit is $0.016. The 23.6% extension level at $0.0169 can also be used.