Avalanche (AVAX) price has broken below a long-term horizontal support zone. It is likely to continue to decline in the near term.

Weekly outlook

Avalanche (AVAX) price has been moving lower since reaching a yearly high of $22 in February 2023. In the process, the price fell to the $10.70 support zone in early June and bounced up afterward.

This bounce has formed a double bottom when compared to the low created in December 2022. This is a bullish pattern, which often leads to a trend reversal to the upside. The pattern makes more sense when it appears on the weekly timeframe and is combined with a bullish divergence in the RSI.

AVAX/USDT Weekly Chart | Source: TradingView

However, instead of initiating a strong rally in the following weeks, AVAX price was rejected by the horizontal resistance area at $15.7 in early July (yellow arrow). The price then fell below the $10.70 support zone and confirmed it as resistance last week (red arrow).

This is an extremely bearish signal, marking the continuation of the downtrend.

The weekly RSI has also broken below the bullish divergence line and is sloping down, supporting the continuation of the downtrend.

Therefore, AVAX price is likely to continue falling towards the next key support zone at $4.7, marking a drop of over 50% from current levels.

Bullish divergence

Despite the bearish outlook from the weekly timeframe, the daily chart suggests it could recover in the next few days. This is due to positive developments in the RSI indicator.

This indicator has formed a significant bullish divergence and exited the oversold zone. This is a sign that often occurs before recoveries.

Therefore, AVAX price could recover to the resistance zone at $11 in the next few days.

AVAX/USDT Daily Chart | Source: TradingView

Conclude

The most likely outlook suggests that #AVAX prices will continue to decline in the near term. However, a short-term recovery to the $11 resistance area will occur before the price continues to decline.

The long-term bearish view could be invalidated as AVAX price closes the weekly candle above $10.70 and confirms it as support thereafter. At the time, this move showed that the previous incident was a bear trap.

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