An analyst has pointed out that Chainlink could see a major bullish breakout if the price can break past the resistance barrier of this technical analysis channel (TA).
Chainlink is currently trading in a triangle
In a new after at X, analyst Ali Martinez has talked about a level that could trigger a major bull rally for Chainlink. The level in question is the top line of a triangle of TA. This pattern occurs when the price of an asset moves between two converging trend lines. Like any other consolidation channel in TA, the top line of a triangle is a source of resistance and the bottom line of support.
Triangles can be classified into different types depending on how the trend lines are oriented. Because the top line is parallel to the time axis, it creates what is known as an ‘ascending triangle’. Likewise, the lower level, which is parallel, forms a ‘descending triangle’.
These two types correspond to consolidation periods in the asset, where the range narrows to an uptrend and downtrend respectively. When the range without bias decreases, the resulting channel is called a “Symmetrical Triangle”. In this triangle, the trend lines approach each other on approximately equal and opposite slopes.
The Triangle that Chainlink has been following in recent years does not fit into any of these classes. Instead, the canal lies somewhere between an ascending triangle and a symmetrical triangle, as shown in the map shared by Martinez.
As visible in the chart above, Chainlink’s 1-day price retested the upper level of the Triangle earlier this year and found rejection. The currency has been on its way down ever since.
The chart also shows that LINK is slowly approaching the end of this multi-year channel. In general, breakouts become more likely as an asset’s reach decreases. Since the coin is now clearly trading within a narrow range, a breakout could be closer.
A rise above a triangle is usually a bullish sign, while a fall below the channel can lead to bearish action. As such, Chainlink’s next retest could be worth keeping an eye on as a breakout could set the tone for the coin’s upcoming price action.
However, it remains to be seen whether LINK would then retest the higher level or the lower level. In the scenario that the coin can break past the resistance line around $25, the analyst believes that the price could see a bull rally.
For the target, Martinez referred to the Fibonacci Extension level of 1,272. Fibonacci extension levels drawn from the top (considered the 1 level), based on ratios from the famous Fibonacci series. The analyst’s indicated level of 1.272 is around $100.
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At the time of writing, Chainlink is hovering around $18, down more than 2% in the past seven days.