Avalanche (AVAX) Triggers Technical Selloff: Expect Further Downside After High-Volume Reversal

1. Chart Overview and Contextual Trend Analysis

AVAX has experienced significant price volatility over the last three months. After a high near $26.75 (2025-05-12), price endured a mid-term downtrend, troughing near $16.50 (2025-06-22). This downswing was followed by a bullish reversal, with the chart showing a powerful, high-volume rally, peaking again just above $26 (2025-07-22).

The latest daily candle (2025-07-23) presents a sharp intraday decline: opening at $25.87, peaking marginally higher at $25.99, but closing at $23.65. There’s strong evidence of aggressive selling pressure, with a daily range over $2.5 and heavy volume.

2. Technical Indicators & Pattern Analysis

A. Price Action & Trend Structure

• Primary Trend: Strong bounce from June lows, followed by a three-week bull run.
• Short-Term: Steep reversal from fresh highs. Today's candle is a large bearish engulfing pattern, often a prelude to further downside.
• Support/Resistance:
  • Support: Key support sits at ~$22.5 (confluence of previous swing tops and the breakout level), followed by $21.1 and $19.7.
  • Resistance: Immediate resistance is now $24.8–$25 (previous close, short-term broken supports).
• Volume: Today’s sell-off is on abnormally high volume, hinting at a possible distribution event.

B. Moving Averages

• 20-day EMA: Estimated at ~$22.5 (recent mean of closes). Price climbed well above but has now snapped lower.
• 50-day SMA: Around $21; major uptrend support.
• The close below the 20-EMA after many days above is a short-term bearish trigger.

C. RSI (Relative Strength Index)

• Recent estimation: The multi-week rally likely pushed RSI to 70+ (overbought); today's massive drop could drive it toward neutral (45–50), showing momentum sharply reversing.

D. MACD (Moving Average Convergence Divergence)

• Histogram: Strong bullish in past weeks, but today’s price action is apt to push the MACD towards a bearish cross (signal line poised to cross above trigger).

E. Volume Profile

• The volume on the rally up was substantial, yet today's capitulation sell volume dwarfs the last two weeks. This suggests distribution by strong hands. Typically, such moves foreshadow further correction as retail is caught off-guard.

F. Fibonacci Retracements (from June low $16.50 to July high $26.05)

• 23.6%: $23.80
• 38.2%: $22.56
• 50.0%: $21.28

Price closed today just below the 23.6% retrace and is threatening further downside. The next solid defense zone is $22.56.

G. Intraday Structure (recent hourly chart)

• The hourly chart shows a stair-step drawdown: failed bounces, persistent lower highs/lows.
• No significant bullish reversal pattern yet—momentum is strongly with sellers.

3. Sentiment, Volatility & Order Flow

• Sentiment: Strong euphoria has turned to fear, as evidenced by the engulfing daily candle and the follow-on selling.
• Volatility: High; ATR (Average True Range) has spiked. Sudden swings of $1+ per hour are observed.
• Order Book/Flow: Given the massive sell volume and continual new intraday lows, selling pressure dominates. No evidence of absorption or reversal yet.

4. Synthesis of Technicals & Expected Probabilities

• The breakdown from above $25 is sharp, on heavy volume, with no reactionary recovery evident on hourly or lower timeframes.
• The confluence of technical signals (bearish engulfing, high-volume down candle, breaking below first Fib support, MACD reversal, and volume spike) robustly favors a continued pullback.
• The next major support aligns at $22.5—the 38.2% retracement and prior breakout/rollover zone.
• Short-term mean reversion is likely, but structural cracks suggest this is not a healthy pullback; rather, it appears the start of a corrective phase.

5. Trade Plan and Optimal Entry

• Given the momentum, a short position is appropriate.
• Ideal short entry is on a minor relief bounce, ideally in the $23.95–$24.15 range (close to the previous hourly support, now resistance).
• The first target is $22.60—aligns with both Fib confluence and structural support.

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Conclusion: Bullish momentum in AVAX is broken in the short-term. Selling pressure, high volume capitulation, a strong bearish engulfing candle, and a confluence of support and indicator breaks all point to additional short-term downside risk. The optimal strategy is to Sell (Short) on a relief bounce near $24, targeting $22.60 for profit.