Key Insights
- Increasing open interest amid price fall indicates new capital flowing into the market before a breakout.
- Bollinger Bands contracting and relatively steady RSI hint at a volatility squeeze, typically followed by significant price movement.
- Intelligent money holds a greater long-term position than retail investors.
PENGU Set for Critical Breakout Period
It looks like PENGU is entering a very crucial period as the technicals, along with derivatives market analysis, are pointing towards a breakout period for the cryptocurrency. At the moment, PENGU is stuck in a tight range, with the volatility gradually declining during recent sessions. Such developments generally indicate a big price movement in the making.
Currently, we are witnessing the emergence of a standard squeeze pattern, wherein the price range is gradually closing up. As this happens, the pressure starts building on buyers and sellers, who are waiting to enter a new trend. At the same time, all signs point to the bulls taking control of the market soon.
Bands Compressing Indicates Upcoming Expansion
One of the best indications we have at the moment is provided by the Bollinger Bands, which are now narrowing at an extreme rate. The fact that they are compressing means that volatility is low, and that the market is set to break out. As has always been seen in the past, when this happens, prices are set to move sharply.
On the other hand, the RSI indicator stands at 56, meaning that there is continuous buying pressure but that it is not yet overbought. Therefore, there should be more room left before we see a bearish trend forming in the market. Finally, the MACD is relatively flat, suggesting that the momentum in the market is balanced. These indicators suggest that the market is in the process of accumulation.
Repetition of Resistance Tests Heightens Breakout Odds
PENGU has made several tests on an important resistance level of around $0.008, with each repetition seeming to erode the sellers’ resolve. This is noteworthy since multiple attacks on a resistance level often burn up the available liquidity, thereby increasing the probability of a breakout on the next attempt.
As the resistance level becomes weaker, the breakout odds will continue rising. After the breakout, the automated trading system and momentum-based algorithms will likely add further upward pressure. As such, the price may quickly surge towards the next target of $0.009.
The narrowing range indicates that algorithmic traders are keenly watching the resistance level. Therefore, once it breaks out, there will be a quick rally.
The Bullish View Supported by Increase in Open Interest
An additional key element of the bullish sentiment is the increase in the open interest. It has risen by about 6.86% to reach $22.2 million, despite the spot price falling by over 8%. The significance of this difference is that new open interest is being added, rather than previous contracts being closed out.
In many cases, such actions signal strategic positioning, whereby investors are positioning themselves to profit from future price moves. Instead of taking action to close out their current positions due to the decline in prices, they are adding new positions in the hope of a breakout in the future. It can be seen that such actions could be fuel for a sharp price rally.
The Smart Money Has a Significant Long Bias
According to statistics from leading traders, there is a tendency for long bias among the smart money, where around 60% of them have a bullish outlook, compared to just 56.7% from the retail investors. Although the differences appear negligible, they reflect a notable disparity in terms of commitment between experienced traders and average investors.
Such a situation implies the activity of professional or upper-level traders who are building up their positions amid the consolidation stage. In the past, similar trends were always followed by growth in prices, because professionals always positioned themselves in advance before the onset of significant changes.
Moreover, the rather stable ratio of buyers vs. sellers confirms this assumption since controlled accumulation is a much more reliable process.
Key Resistance and Support Areas to Pay Attention To
In order for this scenario to be fulfilled, there should be an eventual break above the $0.008 resistance area, which will mark the beginning of the next uptrend leg towards the $0.009 area.
As for possible support levels, $0.0074 is critical to watch as any movement lower may lead to further losses for PENGU to the $0.006 level because of the potential stop loss order execution.
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