On January 15th of this year, TAO had a beautiful breakout out of the bull flag printing four bullish candles and making 380% gains in 8 weeks. Since then, TAO has had a significant retracement of about 58% and is currently struggling to hold current support (S1). Although it was looking to perhaps break out of its current bull flag pattern and move back up, it hasn’t yet. In fact, there is a good possibility that it could break below the current support level and move towards the next support level (S2). On the other hand, if TAO can close this next 2-week candle above support, there is a possibility that it may move back up and above the support level, towards the next level of resistance (R1). Which is more likely? Let’s take a closer look
STOCH RSI (Stochastic RSI): Is getting close to the bottom of the range. It could remain here at these levels for a while and it is important to wait for a cross and a move to the upside, before a change in momentum.
RSI (Relative Strength Index) & MFI (Money Flow Index): Both have been on a bearish down trend since February 26, 2024, as indicated by the (WHITE) trendlines. We could see continued movement to the downside, towards the bottom of the channel. Alternatively, we could see these indicators flatten out and/or start moving to the upside, indicating seller exhaustion.
Bullish Scenario: With the last 2-week candle close, TAO looked like it was leading to break out of the bullish flag pattern, but with the recent drop in BTC, it is now showing some weakness.
If it can move up and pass through support (S1) with some significant volume, then we could perhaps see the bullish breakout play out.
We will have to wait and see. Waiting for the STOCH RSI to cross to the upside and the change in the direction of the RSI and MFI would indicate a switch to bullish momentum, but this could take several weeks or few months to play out.
Once TAO continues to print some green candles and moves above the 7 SMMA on this 2-week chart (or the 21 Week EMA), we can be more confident of the bullish move.
Bearish Scenario: TAO is currently struggling to hold the support (S1), which if it doesn't do, that support will soon become resistance, indicating bearish momentum.
If it moves back below the support level (S1), we could expect some trading between the (S1) and (S2) for some time - even testing the next support level (S2).
If TAO stays and continues moving below the 7 SMMA, this could indicate sustained bearish momentum.
We also need to keep an eye on the RSI and MFI for continued selling pressure and movement to the downside, which is currently indicating the bears are still in control.