Tezos Rally Fizzles After 100% Gain — Likely Top for XTZ/BTC Appears
Traders are watching the XTZ/BTC pair as Tezos price action cools off after a volatile multi-week rally led to a 100% gain.
Lately, Bitcoin (BTC) price has been trading in a range that favors bears and this has led traders to shift their focus to altcoins.
Interestingly, there has also been some very volatile price action taking place over the past 24-hours, especially with Binance Initial Exchange Offerings (IEOs) like Matic Network (MATIC) which dropped 60% on Dec. 9. This drop led several other Binance IEO’s to dump and a handful of non-IEO altcoins also followed.
However, one of the most active coins lately is Tezos (XTZ), and its recent 100% rally validates the need for a deeper analysis of the asset’s price action.
Crypto market daily performance. Source: Coin360
Tezos rallies 100% over the past six weeks
Tezos was one of the most energetic performers throughout November and the price rallied from $0.735 to a high of $1.64 a few days ago.
XTZ USD daily chart. Source: TradingView
The daily timeframe of the XTZ/USD pair shows a nice breakout from a falling wedge pattern that occurred at the end of October. The price immediately flipped the $0.85 level as support, which created space for continued upwards movements towards $1.65. The current level is the resistance level where the price was rejected.
This rejection also shows that the chart has potential bearish divergences, which can imply that the price is temporarily reversing here. Exciting levels for support are seen through the $1.20 area and the $1.30 horizontal level.
Bearish divergences spotted on the 4-hour chart
XTZ USD 4-hour chart. Source: TradingView
The 4-hour chart of Tezos is showing a continuation pattern at $1.30. The price continued to make higher lows, which usually marks an uptrend and broke out of the triangle structure at the beginning of December.
This breakout caused the price to push towards the next resistance zone, the red area around $1.65. As is seen in the chart, the RSI indicator started to show a bearish divergence, which generally marks a potential trend reversal. In this case, the price started to reverse and dropped towards the $1.46 level.
XTZ/BTC pair shows a possible top formation
XTZ BTC daily chart. Source: TradingView
The XTZ/BTC pair is showing a healthy chart in which many technical aspects are shown. First of all, the price pushed through the resistance at 0.0012600 satoshis (sats) at the beginning of November. This area was immediately flipped support.
These well-known support/resistance flips are the way to go in trading as they generally lead to the continuation of the price movements. It also grants an excellent trade opportunity with low risks involved.
Similarly, the movements at 0.0016500 (sats) are identical to the ones seen at 0.0012600 (sats) and also shows a support/resistance flip at this level. This caused the price to move to the next horizontal level, seen around 0.0022000 (sats).
However, as was discussed earlier, divergences often lead to the top or bottom signals. Traders should note that Tezos is showing a bearish divergence on the daily timeframe.
Given that the divergence is on such a high timeframe, the significance and strength are high (as these divergences are stronger than on a 4-hour chart, for example). Therefore, traders should take note of this and