Chainlink plummets below $7 as sell pressure overwhelms bulls

Disclaimer: The information presented does not constitute financial, investment, trading, or other types of advice and is solely the writer’s opinion.

• The sudden drop to $6.8 saw large quantities of long positions liquidated.
• The price action showed that a retest of $7 could be followed by another move downward.

Chainlink [LINK] had an optimistic outlook on the price chart last week. The bulls were knocking on the doors of the $7.7 resistance zone with strength. Yet, the sellers managed to prevail. A retest of the same resistance zone saw LINK rejected, yielding losses of 10% within 36 hours that began on 14 August.

Read Chainlink’s [LINK] Price Prediction 2023-24

The technical indicators showed that the next few days were likely to see LINK descend further. The RSI showed strong bearish momentum and the OBV noted increased selling volume over the past two days.

The Chainlink bullish order block breached with ferocity

Source: LINK/USDT on TradingView

The H4 bullish order block (cyan) extended from $7-$7.2. It was the region where LINK began its earlier rally that faced rejection at the $7.7 level. A retest of this zone might provide a bounce in prices.

This was not to be. The recent wave of selling saw a large candle with massive trading volume close the H4 trading session below the order block. Hence this region can be expected to serve as resistance as it was changed to a bearish breaker block.

To the south the $6.58 and $6.06 levels were ones to scrutinize. The bulls could drive a bounce in prices at those places. Short-sellers can look to enter positions targeting these levels with invalidation above the breaker block.

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Long liquidations painted a not-so-pretty picture

Source: Coinalyze

As Chainlink prices breached the $7 mark to sink as low as $6.8, it triggered a cascade of long liquidations. These positions were forced to sell and added to the bearish sentiment in the market. Over the past few hours, the long liquidations slowly ticked higher again.

The OI has been relatively stable after the plunge. If the OI rose alongside falling prices it would indicate an acceleration in short positions being opened. This would compound the bearish sentiment in the market.