NEAR was bullish, but a key technical indicator was showing an increasing divergence.
NEAR Protocol [NEAR] more than doubled in value after the January rally. It jumped from $1,247 to $2,721, but then fluctuated. The value of NEAR was at $2,501, but it was increasingly facing a probable correction, due to the divergence of a technical indicator.
It is worth remembering that one of the most common indicators when working on technical analysis is the RSI indicator. The RSI stands for Relative Strength Index.
The RSI, originally developed by J. Welles Wilder in 1978, is an oscillator-type indicator that reflects the relative strength of bullish movements, compared to bearish movements. It is used by traders to gauge the strength of a trend and identify trend-ending signals.
The RSI indicator provides valuable market information and trading signals. It measures the relationship between the up and down movements, and normalizes the calculation so that the index fluctuates in a range of 0 to 100.
The RSI Increasing Divergence from NEAR: Is a Correction Likely?
The daily chart showed that a bullish NEAR faced a successful rally in January, but faced price rejection at the overhead resistance level of $2,721. However, the upward price action was the opposite of its Relative Strength Index (RSI).
The RSI has been trending down since mid-January, a divergence with price action that could suggest a possible correction in the coming days.
Based on the height of the recent price consolidation range of $2,323 and $2,721, the correction could target support at the 50% Fibonacci level of $1,984.
However, the decline could also be sustained by the 100 day EMA, or the 61.8% Fibonacci level. These could act as short sell targets if the correction occurs.
Nevertheless, the bias above would be invalidated if the bulls break above the 100% Fibonacci level of $2,721. Such a rally will allow the bulls to retest the October support level of $2,771 or the November high of $3,342.
NEAR Saw Fluctuating OI and A Decline in Active Users
According to data from Coinglass, NEAR’s fluctuating open interest (OI) rates undermined a strong uptrend rally. At press time, NEAR’s OI had fallen sharply but leveled off, signaling a possible change in momentum that could support NEAR’s uptrend.
However, a prolonged drop in OI could undermine further uptrend as more money flows out of the NEAR futures market.
On the other hand, NEAR’s daily active users and trading volumes have fallen since mid-January. The trend shows that fewer accounts were trading close, which could undermine the buying pressure needed for strong uptrend momentum.
As a result, bears could be inclined to devalue NEAR and set it at a correction.
By Audy Castaneda
