Terra (LUNA) at risk of 50% drop if bearish head and shoulders pattern plays out
Terra (LUNA) may fall to nearly $25 per token in the coming weeks as a head-and-shoulders (H&S) setup develops, indicating a 50% price drop, according to technical analysis shared by CRYPTOPIKK.
H&S patterns appear when the price forms three peaks in a row, with the middle peak (called the "head") higher than the other two (left and right shoulders). All three peaks come to a top at a common price floor called the "neckline."
Traders typically look to open a short position when the price breaks below the H&S neckline. However, some employ a "two-day" rule where they wait for the second breakout confirmation when the price retests the neckline from the downside as resistance, before entering a short position.
Meanwhile, the ideal short target for traders comes out to be at length equal to the maximum distance between the head and the neckline. In LUNA's case, the price has now been heading toward the same H&S short target, currently near $25, as shown in the chart below.
Meanwhile, the volume recorded during the H&S breakout appears consistent, underscoring that the ongoing downtrend has enough bearish sentiment. This further raises risks of further declines in the Terra market.
LUNA's daily momentum indicators, primarily relative strength index (RSI) and money flow index (MFI), have both entered their respective oversold regions, which some might consider to be a buy signal. CRYPTOPIKK recognized that they could prompt the LUNA price to rebound but said "the trend still seems [to be] heading down."
The bearish outlook appears as the LUNA trades under the pressure of strong macroeconomic catalysts, mainly the U.S. Federal Reserve's decision to unwind its $120 billion a month asset purchasing program entirely by March, followed
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