Ripple's XRP continued its rally on Wednesday as it looks to test the upper boundary of a key flag channel. Following the recent price rise, investors booked profits worth nearly $800 million while options traders bet on the remittance-based token hitting the $5 mark.
XRP options suggest bullish momentum amid profit-taking among investors
XRP has surged over 20% since Tuesday after Ripple announced it received approval to launch its RLUSD stablecoin. Since recovering from the dip just below $2, investors have booked nearly $800 million in profits. This developing trend of high profit-taking upon any major price rise could slow down XRP's bullish momentum.
Additionaly, XRP's weekly active addresses have also begun to taper off, declining from 496K last week to 341K on Wednesday. This signals lesser on-chain activity and investor interest for XRP.
Meanwhile, the XRP options market shows that traders favor an upside move, with the $5 call being the second-most traded XRP option, according to Amberdata, CoinDesk reported.
The $5 call on options exchange Deribit also hosts a notional open interest of $1.25 million — the highest among out-of-the-money calls. Out-of-the-money calls are option contracts with a higher strike price than the underlying asset's market price.
Ripple's XRP bull flag signals rally toward $4.75
XRP is posting a bull flag following its recent consolidation in the past few days.
This pattern is formed by a sharp price increase known as the flagpole, followed by a consolidation that resembles a flag before a breakout occurs.
If XRP sustains a high volume above the upper boundary of the flag channel, it could signify the continuation of its rally with a maximum profit target near $4.75. However, it must first overcome the resistance near the $3.00 psychological level to complete such a move.
The Relative Strength Index and Stochastic Oscillator momentum indicators are above their neutral levels and trending upward, indicating dominant bullish sentiment.