XRP entered the new week with a technical setup starts to tilt in favor of bulls, despite the price action is stuck within a range. A bullish divergence has appeared on the daily chart, indicating that downward momentum may be fading and a recovery could be near.
However, XRP’s price structure is fragile and technical analysis has revealed a level that could either support a recovery attempt or lead to a new round of selling pressure.
Bullish divergence shows that selling pressure is losing steam
The basis of the bullish case is the daily divergence now visible on the daily candlestick chart. XRP remained within a narrow range of $1.34 to $1.50, but its momentum is no longer falling at the same pace as the price.
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When price makes a lower low but momentum refuses to follow, as the RSI is currently clearly visible on the XRP daily chart, this tells traders that the selling pressure behind each lower leg is weakening. On paper, the Bears still have the power, but they’re running out of fuel.
This is exactly what unfolded during the February lows. The price fell to the $1.13 range during a capitulation flush; the RSI fell into the oversold territory below 25. However, the price action is now starting to stabilize and consolidate between around $1.34 and $1.40, but this has not led to the creation of higher highs.
However, the RSI is showing momentum and is quietly starting to recover to build a higher low. That difference is now confirmed on the daily time frame with the start of the new week.
Why $1.34 is the level bulls can’t afford to lose
Despite the improving short-term outlook, the bullish thesis has a very clear line in the sand. According to technical analysis of a crypto analyst known as “Guy on the Earth,” anything below $1.34 would invalidate the scheme in the short term. That makes this the level traders will likely pay the most attention to at the start of the week. At the time of writing, XRP is trading at $1.36, just above the important $1.34 level.
This support is important because it has been effective become the price floor of the current range. XRP has traded just above that for several sessions, showing that buyers are still willing to defend that zone. According to the analyst, a clean break below $1.34 would open the door to another leg lower or see a capitulation fuse close above $1.34.
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Signals are one thing; confirmation is another, and for XRP, confirmation costs only $1.50. The chart above shows the upper end of the current range around $1.50, and that is the level bulls need to break through if XRP is going to turn recovery speak of a real trend reversal.
Featured image from Getty Images, chart from Tradingview.com