- Ripple must hold above the 200-day SMA to avoid a potential price drop to $0.5.
- The RSI's negative divergence affirms the bearish outlook as technical levels fade.
Ripple could be in for another downswing if the technical outlook fails to turn around. This week's freefall from levels close to $1 to $0.78 incredibly dented the hopes for an immediate recovery. At the moment, XRP trades at $0.86 amid a seemingly losing bullish battle to gain ground above $1.
Ripple's chances for recovery diminish
Despite the support at $0.78, XRP is not out of the woods. Consider the acute resistance at $1, as highlighted by the 100-day Simple Moving Average. Note that the longer XRP stays below this level, the more muscular bears get. Besides, buyers are getting weary in light of their efforts going unrewarded. Psychologically another rejection at $1 may culminate in massive sell orders.
Consequently, the 200-day SMA provides primary support at $0.7. This buyer congestion zone is crucial for ensuring that massive losses are avoided. However, if broken, the bearish leg will stretch toward $0.5 before a significant recovery comes into play.
XRP/USD daily chart
The Relative Strength Index (RSI) has formed a bearish divergence from the price on the daily chart. This is a key bearish chart pattern highlighting the possibility of a long-term downtrend. A bearish RSI divergence occurs when the price forms a higher low pattern while the RSI molds a lower high pattern.
The break of the RSI from the price insinuates that bulls are losing traction as sellers gain control. Therefore, Ripple may continue with the ongoing correction until the RSI lifts above the trendline to form a new pattern.
XRP/USD 4-hour chart
The SuperTrend Indicator on the daily chart has a sell signal sustained from the last week of April. A similar sell signal was presented in December 2020 and resulted in Ripple plunging by over 70%. Hence, chances for significant recovery from the prevailing market value are narrow.
Holding above the 200 SMA may avert the massive losses and perhaps allow bulls to focus on recovery. Formidable support is required above $1 to validate the uptrend to $2.