PEPE's upward momentum may face stagnation
Technical indicators and on-chain data suggest that PEPE could face a 20% pullback with a target of $0.0000130 to retest the average.
The bearish outlook will be broken if PEPE can flip the $0.0000172 resistance level into support.
In the past two weeks, PEPE, a meme coin, has almost doubled in market value. However, given the recent strong gains, investors may expect a short-term correction. This may be a good opportunity for patient long-term buyers to enter the market.
From May 19 to 27, PEPE’s price surged by nearly 100%, and this short-term rally pushed the frog meme coin to a new all-time high (ATH) of $0.0000172. However, during the last leg of the rally from May 21 to 27, PEPE has shown signs of fatigue.
The sell signal is clear from the price chart. While prices are making higher highs, the relative strength index (RSI) is making lower highs. This divergence is known as a bearish divergence and usually signals a possible correction or reversal of the uptrend in the short term due to a lack of sufficient bullish momentum in the market.
Currently, PEPE’s price action has started to correct, having fallen nearly 6% since its all-time high (ATH). If the bearish trend continues, PEPE could fall further by 20% to $0.0000130, which is the midpoint of the $0.0000172 to $0.00000878 range.
This kind of correction or mean reversion is very common after an asset has rallied sharply in a short period of time. The mean reversion process helps to rebalance the market imbalances created by such a sharp rise. Therefore, investors should consider taking profits at the current price or prepare to buy PEPE again at the upcoming lows.
The 30-day market value to realized value (MVRV) ratio indicator is hovering around 42%, according to Santiment, indicating a potential sell signal.
Data shows that investors who bought PEPE in the past month have realized an average gain of 42%. If these investors choose to take profits at this time, the unrealized profits are likely to quickly turn into selling pressure.
Adding to the bearish view, data shows that both the peak number of active addresses in the 24-hour period in mid-May and the current situation are down, which is not in line with the typical situation of PEPE price action. This bearish divergence pattern once again confirms the potential correction that PEPE may be about to experience.
While the overall outlook for PEPE looks bearish, the signal could reverse if a crisis sets in. In this case, if PEPE is able to convert the $0.0000172 barrier into a support floor on the daily timeframe, this would invalidate the bearish view.
This development likely attracted many investors to take profits, triggering a subsequent plunge in PEPE prices to $0.0000120, which was the midpoint of the daily imbalance extending from $0.0000125 to $0.0000114.
