Chainlink’s recent surge price may be due to its correlation [90-day] with bitcoin, which stands at 0.6, however, there is more to it. The smaller bits that may have caused this price surge could be its fundamentals which are getting stronger. Chainlink’s oracles are gaining popularity as they were recently integrated by Matic and Base Protocol.
With its price at $15.28, Link eyes its previous glory point of $20, however, there it is a long way. For now, on a short-to-medium term, Chainlink’s price looks bearish.
Chainlink 4-hour chart
Source: LINKUSD TradingView
The 4-hour chart shows that the price of Link is bearish, at least in the short-term. We can expect a short pullback from the bearish pattern it has formed over the last week. The pattern is an ascending channel, which causes the price to surge higher systematically then causing a drop [or a breakout] in price at the end of the channel.
Price is, somewhat, nearing this breakout point and we can expect a drop soon. Hence, in anticipation of this, we can short the Link market and expect a good profit.
Rationale
The main rationale comes from the pattern of the channel; however, adding more to this is the Fibonacci retracement levels seen at the right side of the chart [grey]. The price has failed to conquer the 0.236-Fibonacci level at $16.13, hence, the pullback.
Moreover, the price and the RSI aren’t in sync, if anything, there are moving opposite to each other causing a bearish divergence. Hence, we can expect a drop soon, starting in the next four hours.
Stochastic RSI on a 4-hour time frame indicates a bearish crossover, and the same on a daily time frame, which adds more weight to the short position mentioned above.
Levels to lookout
Entry: $15.70
Stop-loss: $16.63
Take-profit: $13.64
Risk-to-Reward: 2.2
While the setup seems simple and straightforward, there are chances of things going awry, especially, considering the highly volatile nature of the market and Link’s correlation with bitcoin. Hence, care should be advised with stop-loss or trailing stop-losses.
