Polygon (MATIC) price is trading at an important level. Its response may determine whether the future long-term trend is bullish or bearish.
Polygon Network is a Layer 2 scaling solution for the Ethereum blockchain. Its native token is MATIC. MATIC has gained in price since the formation of a bullish hammer candlestick on March 10.
This increase led to a retest of the March 18 0.618 Fibonacci retracement support level at $1.07 and the $1.25 high. While the price has declined again to the $1.07 support area, there could just be a retest of the decrease zone after the breakout.
The daily RSI is at 50, indicating a neutral trend. Therefore, whether the price bounces off the area, makes a higher low or breaks down can determine the direction of the future trend. A breakdown would likely catalyze a decline to $0.93, while the formation of a higher low would mean that the rally is likely to continue towards the $1.57 yearly high.
Is Polygon (MATIC) Price Relief Rally Over?
Technical analysis on the daily time frame shows that the entire 394% MATIC token price gain since June 2022 was contained inside an ascending parallel channel. Since channels usually have a corrective structure, the entire growth may be an ABC corrective structure (black).
Furthermore, the support line of the channel coincides with the March 10 low (red line). Therefore, a breakdown from the channel would certainly invalidate the bullish structure.
In that case, the price would be expected to drop to a 2022 low of $0.31.
On the other hand, as mentioned above, making a higher low and moving above the center line of the channel would invalidate this bearish forecast. In that case, there could be an increase towards the resistance line of the channel at $1.70.
Looking at the weekly time frame it makes sense that the rise was part of a relief rally. In that case, the rise occurred as a correction relative to the previous downward movement (highlighted), which started after the all-time high of the MATIC price. The rally validated the long-term 0.5 Fibonacci retracement support level, with a fresh downside move soon.
To conclude, whether the price of Polygon makes a higher low or breaks below the March 10 low will determine the future trend direction. A breakdown could trade lower near $0.30, while a higher low could propel it towards at least $1.61.
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