Terra [LUNA] saw a 20.1% price drop that began on Monday and stopped in the early hours of Tuesday, at $0.127. Since then, the price has bounced between $0.127 and $0.135, and was at $0.13 at the time of writing.
In a recent report, AMBCrypto had written that LUNA offered a good buying opportunity due to its defense of the $0.15-$0.16 demand zone the previous week. However, the bullish expectations have been proven wrong since after the token’s latest downturn.
Which way will LUNA go next?
Source: LUNA/USDT on TradingView
The 3-day chart revealed a bullish structure for LUNA. The long-term trend has been bearish since May 2022. In between, there have been extended periods during which LUNA’s price action broke the market structure bullishly.
So far, it has been unable to keep any such breakout going for a significant period of time. Maybe, it will never recover to the $80 or $100-levels it was before the Terra crash. However, that doesn’t matter to traders, who can make profits from short-term trends.
The move past the $0.168 local high from mid-September meant that LUNA’s market structure was bullish. This could set up a rally towards some of the preceding swing highs. The OBV’s dramatic upward push, and the volume bars in December underlined increased trading volume behind the price surge.
Source: LUNA/USDT on TradingView
The 4-hour chart revealed that LUNA bulls were barely holding on to the 78.6% Fibonacci retracement level at $0.13. Additionally, the lower timeframe demand zone at $0.15-$0.18 was also ceded to the bears following Monday’s volatility.
Both these developments highlighted a hike in bearish pressure in the short term. The H4 structure was bearish as well.
Which path is LUNA less likely to take?
Given the structure on the 1-day and 3-day timeframes, holding on to a bullish bias makes sense. LUNA only needs to recover past key support levels, such as $0.155, to recover the gains it made a week ago.
At the same time, we should remember that Bitcoin’s [BTC] trend has been bearish too. A breakout past $94k is needed to give it a bullish tinge. Until this happens, the bullish LUNA scenario of a recovery towards $0.2 and $0.24 remains the less likely route.
Traders’ call to action- Is it time to turn bearish on LUNA?
In short, yes. Many times in recent months, LUNA has made a bullish structure break on the 1-day and 3-day timeframes, but was unable to hold on to them. The most recent bullish shift came on the back of much higher trading volume, which could persuade traders to expect a bullish recovery.
Traders looking to go short can wait a few more days to see whether the token can defend $0.13 and reclaim the $0.155 former support or not.
Final Thoughts
- The previous bullish expectations for LUNA were invalidated when the token failed to defend the $0.155 short-term demand zone.
- Bitcoin’s prevailing weakness and the tendency for Terra token bulls to fail to establish an uptrend meant that more LUNA drawdown was likely.
Disclaimer: The information presented does not constitute financial, investment, trading, or other types of advice and is solely the writer’s opinion