By June 2022, the price of Monero (XMR) could see a significant drop. Its 75% gain in the last two weeks could indicate we are entering the Monero overbought danger zone.
Monero is also forming a bearish reversal pattern known as a rising wedge. Price travels inside a range indicated by two ascending, converging trendlines, forming rising wedges.
Disclaimer: This article is not financial advice.
Monero “overbought” danger zone indicative of overvalued market
Rising wedges usually resolve after the price breaks below its lower trendline. Then a long advance to the level that traders find follows. This is done by adding the maximum wedge’s height to the breakdown point.
The downside risks have been increasing as a result of XMR’s relative strength index (RSI), which nearly reached 70 on May 23, suggesting that the market is regarded as overvalued. As a general rule, an oversold RSI can indicate a period of downward movement.
Volumes often fall as they do so, indicating a lack of confidence among traders in the price moves upward.
The XMR token could drop to $138.50 by June, a drop of over 30% from the price on May 24 if the breakdown point is around $180. A breakdown move around the apex point around $200 would reduce the wedge’s downside target to around $150.
Slightly bullish XMR
XMR has been constructing an ascending channel pattern in tandem with the rising wedge. This shows in at least a couple of higher highs and higher lows over the last two weeks.
Meanwhile, the bearish reversal situation offered by the falling wedge pattern outlined above would be invalidated if the price breaks over $200. The decisive move in XMR would move its interim upside target to roughly $220, up about 15% from the price on May 23.
If XMR fails to close above $200, it risks falling into the $180–$175 region, which is noted as the “pullback target” in the chart above. The bottom trendline of the ascending channel coincides with this area.