Traders should exercise caution when considering buying XRP after the recent breakout of the six-week trendline resistance. While the possibility of a short squeeze exists, traders can also look for opportunities to short XRP after a minor bounce. The breakout beyond the descending trendline resistance that has been in place since early March, combined with flipping the $2 level to support, may seem encouraging. However, it does not necessarily mark the end of the downtrend. Previous analysis indicated a build-up of liquidity around $1.95, suggesting a potential deeper price drop towards $1.2. Despite this, the liquidity overhead has pulled prices higher, likely to continue in the short term.
The daily timeframe price chart reveals a bearish structure, with the lower high at $2.23 yet to be breached despite the break of the trendline resistance. The RSI currently sits at 54, showing a bullish momentum shift, while the OBV remains in a downtrend alongside the price. Investors and traders should be cautious before taking bullish positions until a new higher high is set to signal steady demand. Fibonacci retracement levels indicate strong resistance at $2.46 and $2.7 beyond the local resistance at $2.23.
Open Interest behind XRP has increased in the past 24 hours, coinciding with a 6% price rally. However, this rise in OI was not accompanied by a corresponding increase in spot CVD, indicating a lack of buying pressure in the spot markets. Therefore, the recent rally may be primarily driven by derivatives and could potentially falter soon. The liquidation heatmap shows a cluster of high-leverage liquidations just above the XRP market price, extending to $2.25. This accumulation of leverage overhead suggests that short sellers may face being hunted in the short term before a potential bear reversal, resulting in a short squeeze situation that could provide a short-term bounce and present a chance for traders to go short.
In conclusion, while the recent breakout of the trendline resistance and the flip of the $2 level to support may seem positive for XRP, traders should be cautious of a potential downturn as the bearish structure remains intact. The build-up of liquidity around $1.95 and resistance levels at $2.46 and $2.7 indicate possible price movements to watch for. The increased Open Interest and lack of buying pressure in the spot markets suggest that the recent rally may not be sustainable in the long term. Investors and traders should carefully assess their positions and remain vigilant for potential short squeeze opportunities in the short term.
