XRP is another cryptocurrency that has been doing well besides Bitcoin (BTC) in the past few months. However, its price has been slumping lately dropping below $0.50 on Dec. 14, or down nearly 15% over the past two days.
On higher time frames, the price of XRP broke upward from $0.20 in the summer, reaching a temporary top at $0.80 a few months later, a rally of close to 300%, making it one of the biggest moves this year.
There were several reasons for the massive breakout. One of them was the Flare Network airdrop, which took place on Dec. 12. The other argument was the breakout from a long-term downtrend, which XRP has been in since the peak high in January 2018.
Let’s take a look at the new crucial levels for XRP as it corrects following a massive price spike.
XRP up almost 300% after breaking long term downtrend
The daily chart of XRP against USD shows a massive breakout of the long term downtrend. This was triggered after a bullish support/resistance flip at $0.22, after which the price of XRP started to accelerate. This acceleration led to a breakthrough of the $0.30 resistance zone in November.
This acceleration led XRP’s price to the recent high at $0.75 (on other exchanges, a peak high of $0.90 was reached). However, this impulse wave came to an end, as the chart shows a significant correction since.
Several points of interest can be spotted based on the heavy impulse wave. Frequently, traders let emotions lead their decisions. Investors and traders see the price going vertical amid an airdrop announcement, which pushes up the price of the asset in a vertical move.
However, this often ends in sudden disappointment as a correction occurs and the asset price reverts to the mean. Conversely, the hype fading away presents a great entry opportunity for investors and traders.
The first massive support zone is found around the daily order block at $0.45. If that fails to hold, the next big support zone is around at $0.30-0.34. Traders should watch these two zones as they are critical.
Lower timeframes signal a downturn since the peak high
Lower timeframe charts often signal the trend, which is then frequently translated to higher timeframes. This chart is a beautiful example of such an occurrence.
The peak high was made at $0.75, after which a heavy dropdown occurred towards the first primary point of interest. This primary point of interest was found at $0.45-0.49, after which a 50% bounce occurred.
Since that bounce, XRP’s price has made lower highs and lower lows, resulting in a downtrend. Every previous support level became resistance, through which the price continuously fell.
This drop resulted in a retest of the $0.45-0.49 region, which must hold to avoid any more downside. This is the area to watch for a potential bottom, specifically a double bottom construction and a bullish divergence.
XRP/BTC nears support
The BTC pair shows similar levels to watch for after XRP’s significant correction, particularly on higher timeframes.
XRP/BTC failed to break through 0.00003650-0.00003800 sats, which was followed by the downturn. Based on the chart, this correction is likely to continue until it reaches a key level on the daily chart at 0.00002400-0.00002500 sats.
If support is found in this region, a potential bounce to the 0.00002950-0.00003050 sats area is on the table.
Moreover, such a bounce seems likely here, as this region will get its first test since the massive impulse wave. A relief rally should not come as a surprise for XRP at this point, which will result in a temporary low on the USD value as well.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.