Avalanche (AVAX) is at risk of breaking below a crucial support level that has been in place since November 2021. This would indicate that the trend is bearish.
AVAX has been decreasing alongside a descending resistance line since reaching an all-time high price of $147 on Nov 21. So far, the triangle has rejected the token thrice, most recently on Jan 2 (red icon).
Despite the rejection and subsequent decline, AVAX created a strong support level at the $80 horizontal support zone, which previously acted as the all-time high resistance. Combined with the descending resistance line, this would create a descending triangle, which is considered a bearish pattern.
However, it is also possible that AVAX is following an ascending support line (dashed), which would create a symmetrical triangle. This is considered a neutral pattern, so both a breakout and breakdown would be possible.
The possibility of downward movement is also supported by the readings of technical indicators, in particular the MACD.
The MACD is created by a short- and a long-term moving average (MA). Currently, both the signal line and the histogram are negative. This means that the short-term MA is slower than the long-term one. It is a sign often associated with bearish trends.
The last time this happened was in August 2021 (green circle), when the AVAX price was near $20.
Furthermore, the RSI, which is a momentum indicator, is below 50. This is also a sign of bearish trends.
In the event of a breakout, the closest support zone would be at $62. This is the 0.618 Fib retracement support level.
AVAX wave count
Cryptocurrency trader @CryptoTony_ tweeted an AVAX chart, stating that if the Jan 7 low holds, it is possible that the token will continue increasing towards a new all-time high.
Should the correction end with the January 7th lows (red line), the ensuing rise should be a five-wave upward move. However, the increase was a three-wave pattern (highlighted).
Therefore, it is more likely that the AVAX trend is still bearish, and the token will eventually break down.