Pyth Network [PYTH] has seen a massive surge in activity lately, with the asset recording double-digit percentage gains in price. This wasn’t to last, however, as at press time, PYTH had declined again.
In fact, chart analysis showed that there may be a risk of a further decline, and traders might need to cool their optimism.
PYTH faces key resistance
PYTH recorded a major price swing on the charts recently. However, that bullish run came to an end soon after after the asset started trading in the middle band of the Bollinger Bands.
Bollinger Bands help traders assess whether an asset is overvalued or undervalued by tracking its price relative to the upper and lower bands. The middle band tends to act as a support or resistance level, depending on several factors, such as momentum and price trends.
At the time of writing, the price had hit this middle band level at $0.079. It seemed to be acting as resistance and pushing the price slightly lower. A rejection at this zone would see the price fall to around $0.070, marking a 10% drop from its press time level.
Additionally, the Accumulation/Distribution indicator, a volume-weighted tool, suggested that the price could decline further as the indicator ticked lower on the chart.
A look at the bearish signals
Other indicators also suggested that the asset may be losing momentum, while revealing a weakening investor outlook. For instance, the Parabolic Stop and Reverse (SAR) confirmed that bearish pressure on the price was building.
The Aroon Indicator corroborated this outlook, although it still showed that the price was well within the bulls’ control. Typically, when the Aroon Up (orange) is above the Aroon Down (blue), with readings of 100.00% and 0.00%, respectively, it alludes to a clearly bullish market scenario.
However, the Aroon Up line has continued to decline, dropping to 57.14%, while the Aroon Down line remained at 0.00%. This type of move suggested that selling pressure has been building in the market.
Based on this, the possibility of a decline cannot be ruled out. However, it may be a corrective phase ahead of a much stronger rally.
Traders reduce PYTH exposure
Finally, perpetual market traders have been gradually reducing their exposure to PYTH despite its surge. Especially as long positions in the market have fallen across the board.
Coinglass data revealed that the funding rate dropped from 0.0038% to 0.0016%, a decline of more than 50%. This happened while the total capital in PYTH’s perpetual contracts rose by 3.95% to $54 million.
This implied that while a majority of the capital in the perpetual market has been in long positions, the growing number of short positions may be a risk that traders should be cautious of.
Final Summary
- PYTH’s resistance at $0.079 and a declining Accumulation/Distribution hinted at a price correction.
- PYTH’s funding rate fell by over 50% to 0.0016%, while perpetual market capital rose 3.95% to $54 million.
