Terra’s LUNA in overbought territory after 180% rally

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Key Points to Remember Terra’s LUNA token is trading in overbought territory after a strong rally. Several technical indicators suggest that a correction is near. A spike in selling pressure could see this cryptocurrency drop to $ 11.00. Share this article

Terra’s native token, LUNA, stole the show in crypto after gaining more than 10 points in market value in 17 days. Now, technicians predict that a peak in profit taking is imminent.

Terra primed to trace

Terra might need a correction.

LUNA has lived up to its name as it has been lunar for the past three weeks. The twenty-third largest cryptocurrency by market cap has jumped nearly 180% since July 20, from a low of $ 5.60 to a high of $ 15.50.

While Terra may have room for another head start, it is currently trading in overbought territory. The Relative Strength Index or RSI is hovering at a value of 82.20 on the daily chart, which is concerning.

Whenever LUNA’s daily RSI has crossed the 80 mark since mid-February 2020, a strong correction has followed.

The Tom DeMark (TD) sequential indicator adds credence to the bearish thesis. This technical index is about to present a sell signal in the form of nine green candlesticks in the same time frame.

While the bearish formation has yet to form, the near term future does not look good for the bulls.

Source: TradingView

A look at Terra’s daily chart reveals that the TD setup has been incredibly accurate in anticipating local highs on the LUNA trend. The five sell signals that this indicator has been showing since the start of the year have all been validated, resulting in significant retracements.

Therefore, the pessimistic scenario should be considered despite the significant buying pressure observed behind LUNA.

The Fibonacci retracement indicator (measured from March 21 high of $ 22.40 to May 23 low of $ 3.90) suggests that a peak in profit taking around current price levels could cause a dip Terra around $ 11.00. Failure to maintain this crucial support level may result in a more pronounced correction to $ 7.90.

It should be noted that as the TD sell signal has not yet been formed, LUNA may advance further before the retracement materializes. A clear break of the 38.20% Fibonacci retracement level at $ 15.30 would signal a partial continuation of the uptrend to the 23.60% Fibonacci retracement level at $ 18.00.

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