- Optimism appeared to have a bearish market structure and could fall further
- Presence of high leverage short liquidations around the $0.62-level meant that a squeeze may be possible
Optimism [OP] shed 29% of its value over the last ten days, retracing all the gains it made from 9 to 26 April. At press time, the sellers were dominant once again and further losses appeared likely.
However, a bullish Bitcoin [BTC] might shift OP’s market sentiment.
Optimism bulls forced to tuck their tails and run
Source: OP/USDT on TradingView
The 1-day market structure is not yet bullish. The price did not push beyond the recent lower high at $0.92 set in mid-March during the token’s four-month downtrend. After forming another lower high at $0.842, OP bulls faced rejection once again.
The drawdown measured 29% over the past ten days. The OBV was back at the lows it had formed in early April. The Awesome Oscillator noted a bearish momentum shift as the indicator fell below the zero line.
The resurgence of the selling pressure and the shift in momentum were in agreement with the longer-term bearish market structure. Therefore, investors and swing traders can expect further losses.
A move below the local support at $0.59 would be a sign that OP may be gearing up for a drop to $0.51. Traders can use a retest of the $0.59-level as resistance to go short.
The 1-month liquidation map revealed that there were several high leverage short liquidations above the price. Hence, even though the momentum and structure on the price chart were bearish, the presence of liquidity overhead could see a minor price bounce.
The $0.6-$0.63 region is an attractive short-term target. A price bounce over the next couple of days could give short sellers an opportunity to enter the market. However, the bullishness of Bitcoin would be something to keep an eye out for.
Disclaimer: The information presented does not constitute financial, investment, trading, or other types of advice and is solely the writer’s opinion
