ApeCoin (APE) has undergone a sharp recovery after falling to its lowest level in two months. But its strong correlation with Bitcoin (BTC) and U.S. equities amid macro risks suggests more losses could be in store.
APE rebounds after 80% losses in two weeks
APE rebounded by nearly 45% to $7.30 on May 12. The upside retracement move came after APE dropped circa 81% to $5 on May 11, from its record high near $27.50, established on April 28.
The seesaw price action mirrored similar volatile moves elsewhere in the crypto market, led by the chaos around TerraUSD (UST) — an "algorithmic stablecoin" whose value plunged to $0.23 earlier this week, and the Federal Reserve's hawkish response to rising inflation.
Meanwhile, the correlation coefficient between ApeCoin and Bitcoin is now around 0.90, suggesting that it's trading nearly in tandem with BTC, which is testing multi-year lows.
Dead cat bounce?
ApeCoin's rebound occurred near what appears to be a strong technical support level.
Notably, APE is holding above $5.82, which coincides with the 0.786 Fib line of the Fibonacci retracement graph sketched from the $0.97-swing low to the $23.65-swing high. Meanwhile, the token's daily relative strength index's reading is just above its "oversold" threshold level of 30 — a buy signal.
Therefore, a rebound move from the $5.82-support could have APE test $9.63 (the 0.618 Fib line) as its near-term upside target.
Conversely, an extended breakdown below the support would risk crashing the APE/USD pair into unchartered price territory, confirming that its retracement move was a mere dead cat bounce.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.