XRP has broken out of a multi-year bear market but old resistance zones must now flip to new support for the rally to continue.
As Bitcoin (BTC) has been in the spotlight in recent months, the altcoin XRP (XRP) has been doing reasonably well in its own right. Bitcoin’s rally has been associated with institutions and Wall Street jumping on this new asset class and digital store of value. Meanwhile, XRP has broken out of a multi-year downtrend to regain momentum as well.
However, XRP price has not been able to break the $1 barrier yet despite the Flare Network airdrop now just around the corner scheduled for Dec. 12.
Is this recent move a classic example of "buy the rumor, sell the news" or should more upside be expected? Let's take a look at the charts.
XRP makes the first higher high since January 2018
XRP/USD has been showing some impressive numbers in recent weeks as the token rallied from $0.22 to a peak high of $0.80. This is classic XRP price action as the rallies are vertical and volatile instead of organic and gradual. The recent move is not an exception with the price soaring in a matter of days.
However, the recent move broke through a multi-year downtrend, as the chart shows. This downtrend was broken, establishing a new higher high. In fact, this is the first higher high since the bear market started in January 2018.
Additionally, a smaller rally occurred in August, which lifted the price of XRP from $0.16 to $0.33. After that move, the price of XRP corrected to its previous resistance area at $0.22. This correction marked a bullish support/resistance flip, after which the massive move towards $0.80 occurred, hitting as high as $0.90 on Coinbase last mo.
A correction seems imminent after such as move
The price action of XRP often gives a signal prior to such vertical price movements, after which a more extended correction begins. The chart above shows four previous movements of XRP, which are similar to the last one.
Such big vertical moves typically occur after a lengthy correction that can span weeks to months that sets the stage for the next impulse move.
This is not a bad outcome as impulse moves often need such corrections before more upside. Frequently, these impulsive moves correct towards the previous resistance area to set up a bullish support/resistance flip.
Levels to keep an eye on with XRP
The daily timeframe indicates some beautiful levels to watch for XRP traders or investors. These levels are based on historical price action as both of the crucial zones happen to be previous resistance areas.
The first one is around $0.45, which was already tested during the last weeks. The moment Bitcoin corrected to $16,200, XRP/USD dropped severely toward $0.45, which resulted in a support/resistance flip.
This confirms the massive correlation between cryptocurrencies currently. Altcoins can regain bullish momentum as long as Bitcoin remains stable. However, once Bitcoin starts to correct, altcoins will suffer and frequently see heavier losses than Bitcoin.
Thus, if Bitcoin starts to make a more severe correction in the coming period, the second crucial area to watch for investors is the $0.32 area. This level served as the resistance zone for over a year, through which a support/resistance flip would be extremely bullish here.
Both of these zones happen to be a very bullish case for XRP, though admittedly very painful for investors who bought above $0.70. Hence, if the XRP price consolidates above $0.45 or $0.32, it will establish another higher low for the markets.
This chart gives a simple overview of the market's structure, showing that the recent pump made the first higher high after a multi-year bear market since early 2018.
After a higher high, a higher low needs to be established to continue the uptrend. If either of the two zones becomes a new support zone, the price of XRP will then be ready to set a new higher high in the next impulse move. This higher high will then open the door for the price of XRP to reach $1.00 and possibly even $1.50 in the coming months.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.